Grandparents who look after young children are failing to claim entitlements.
Tens of thousands of grandparents and other family members may be missing out on valuable future state-pension benefits because they’re not aware of a scheme designed to reward them for caring for young children.
Introduced seven years ago, Specified Adult Childcare credits are aimed primarily at grandparents below state-pension age who regularly look after grandchildren – while those children’s parents are at work, for example – who are under the age of 12. The credit can also be claimed by other family members taking on such childcare duties.
The benefit credits these carers with having made national-insurance contributions as if they were themselves working, so that they don’t miss out on building up entitlement to state-pension benefits. Once the carer reaches retirement, a year’s worth of credits can deliver as much as £231 a year in extra state pension – potentially worth thousands of pounds to those who live to average life expectancy and beyond.
As many as 100,000 people are entitled to claim the credit, according to government figures, but a freedom of information request submitted by insurer Royal London found that, in the year to September 2017, fewer than 9,500 applications were received. While that represents a significant advance on the previous year (when fewer than 1,300 carers applied), the fact remains that less than 10% of those eligible for the support are receiving the credits to which they are entitled.
How to claim
Claims for each tax year can be submitted from the October following its end – so claims for the 2017-2018 period ending on 5 April can be made from October 2018, for example. However, it is also possible to claim retrospectively for years in which you were eligible but didn’t make a claim. In theory, you can go all the way back to the 2011-2012 tax year when the credit was first introduced – assuming that your caring duties go back that far. That could add close to £1,000 to your basic state-pension entitlement, on top of the estimated £4,600 over a typical 20-year retirement that a single year’s claim could net.
To claim the credit, use the CA9176 form, available online from HM Revenue & Customs via Gov.uk. The same form can also be used to make a claim for credits from previous years. A separate scheme exists for parents caring for children under the age of 12, who are also entitled to claim national-insurance credits while they are out of the workplace – see the column on the right for details.
Don’t miss out on state-pension top ups
Parents who have opted out of receiving child benefit following changes to the scheme a few years ago could be losing out on valuable state-pension benefits, MPs serving on the Treasury Select Committee have warned.
The problem affects families where at least one parent with a child under the age of 12 stays at home. This parent is then entitled to receive national-insurance credits so that they build up entitlement to the state pension in the same way as people at work.
However, these national-insurance credits are triggered as part of the child-benefit system – and unfortunately, not everyone is registered for that. This didn’t use to be the case, but tax charges introduced in January 2013 now reduce or eliminate the value of child benefit paid to families with household incomes of more than £50,000. As a result, many families in this income bracket have not bothered to make a claim (partly because they then have to pay the child benefit back via a self-assessment return), which means that the non-working parent could effectively be giving up part of their state pension inadvertently.
The Treasury Select Committee is now calling for an investigation into how many families have been affected by the problem, which could cost families tens of thousands of pounds of lost income in retirement.
Tax tip of the week
If you pay for a flight but then do not take it, whether or not this is your fault, you can claim back the Air Passenger Duty (APD) portion of your ticket cost – you pay APD at the time of booking, but it isn’t actually due until you fly. (Note that you only have to pay APD for flights leaving the UK, not on inbound flights, and children under the age of 16 don’t have to pay it when travelling in economy.)
From 1 April 2018, the APD for the lowest class of travel is £13 for journeys up to 2,000 miles from London, and £78 for journeys over 2,000 miles; this goes up to £26 and £156 respectively where you are travelling in a class other than the lowest class of travel. Generally, all you need to do is get in touch with the airline to request that they refund you the amount you paid in APD, but keep in mind that they may charge an administration fee that may be higher than the refund.
Make good use of the carry-forward rules
If you plan to maximise your pension contributions before the end of the 2017-2018 tax year on 5 April, make sure you have made good use of the carry-forward rules. For most people, the annual allowance – the maximum private pension saving they can make – is £40,000 this year, or their earnings, whichever is lower. Higher earners with incomes of more than £150,000 get a reduced allowance – it reduces by £1 for every £2 of income you have over that cap until you reach income of £210,000 or more, by which point the annual allowance falls to £10,000.
If you’re running up against those limits, look back at your tax returns for the previous three tax years: 2014-2015, 2015-2016 and 2016-2017. If you didn’t use your annual allowance in full in any of those years, you’re entitled to carry forward the unused portion to this tax year’s annual allowance. In theory, for people who made no savings at all in the past three tax years, this rule could increase your total 2017-2018 annual allowance to £160,000.
It’s also a good idea to check what annual allowance you were entitled to in the last three tax years. The reduced allowance, for example, only came into effect from the 2016-2017 tax year, so you may have been entitled to the full £40,000 allowance in 2014-2015 and 2015-2016, even if your income was above £150,000 in those years. Equally, if your income was lower than £40,000 in any of those three years, you may not have been entitled to a £40,000 allowance.