How grandparents could boost their state pension

Spending time and bonding with your grandchildren is one of the most rewarding things that life can offer.

While spending time with your grandchildren is a reward in and of itself, there could also be a financial benefit.

If eligible family members, such as grandparents, take on additional childcare responsibilities, then they may be eligible to claim National Insurance credits.

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These credits have the potential to boost the state pension for retirees who have some gaps in their National Insurance record.

Analysis by Quilter shows there have been increasing numbers of applications for the tax perk, known as Specified Adult Childcare Credits (SACC).

A Freedom of Information request submitted to HMRC by the wealth manager shows 19,616 people apply for SACC on average each year, with around 15,400 applications proving successful.

A total of 22,575 people received the credits between October 2022 and September 2023, while 2023/24 saw a huge increase as 33,675 credits were received.

Lisa Picardo, chief business officer UK at PensionBee said these credits “ensure that family members stepping in to support childcare don’t miss out on valuable contributions towards their state pension”.

She added: "In today’s society, informal childcare is essential in helping parents stay in work, and these credits recognise the key role that family carers play – not only in their own families, but in the wider economy.

“Many people are unaware that by simply providing childcare, they could be eligible for credits potentially worth thousands of pounds in retirement. We strongly encourage anyone in this position to check their eligibility and apply."

What are Specified Adult Childcare Credits?

Specified Adult Childcare Credits were launched in 2011 and let a parent receiving Child Benefit transfer the National Insurance (NI) credit to an eligible family member such as a grandparent.

It is a useful way to ensure the NI credit you can get from Child Benefit for a child under 12 isn’t wasted if you are working and already paying enough National Insurance contributions towards your own state pension.

Through the scheme, you can transfer the unneeded credit to someone else in the family who might have a shortfall in their National Insurance record.

While the credits sound great for grandparents who need extra National Insurance credits, there are certain criteria that should be considered.

The benefit can only be claimed for a child up to the age of 12, by an eligible family member.

An eligible family member is defined as a:

• mother or father who does not live with the child
• grandparent, great-grandparent or great-great-grandparent
• aunt or uncle
• brother or sister (including a half-brother or half-sister, a step-brother or step-sister, or an adopted brother or an adopted sister)

You can also qualify as an eligible family member if you are either the:

• Current or previous spouse, partner or civil partner of anyone in the list above
• Son or daughter of the current or previous spouse, partner or civil partner of anyone in the list.

You can apply for Specified Adult Childcare Credits as long as:

• You are an eligible family member, who provided care for a child under 12
• You were aged 16 years and over, but under state pension age, when you cared for the child
• You are ordinarily resident in the UK, but not the Channel Islands or the
  Isle of Man
• The child’s parent or main carer has claimed Child Benefit and doesn’t need the National Insurance credits themselves
• The child’s parent or main carer agrees to your application

The child’s parent or main carer will need to countersign the form, confirming they agree that, for the specified period, you provided care for their child, and they’re happy you can have the credits.

How Specified Adult Childcare Credits can boost your state pension

In order to receive the full new state pension, you will need 35 years of NI contributions (it’s 30 years for the full basic state pension), and at least 10 years to qualify for any state pension.

Applying for SACC credits could therefore be a good way to top up gaps in a National Insurance record to boost state pension entitlement.

SACC can potentially increase a state pension by £328 annually, Quilter suggests.

Over a standard retirement, this could translate to a financial benefit of over £6,000.

There are no set hours required, but there is just one credit available per Child Benefit claim, no matter how many children are on the claim.

For example, if two grandparents provided care for their daughter’s two children, there is only one credit available for transfer.

However, if they provided care for both their daughter’s child and their son’s child, there will be two Child Benefit recipients, and therefore two credits that can be transferred.

“These credits are not only crucial for securing the full state pension if you have gaps in your National Insurance record, but they are also a cost-effective method of doing so, versus paying to fill in missed years,” adds Greer.

“It’s worth knowing too that the number of hours a grandparent helps out with childcare is irrelevant to the claim. Even if it's just one day a week, eligible grandparents should be able to claim.”

How to apply for Specified Adult Childcare Credits

To transfer the National Insurance credit, Child Benefit must have been claimed. Otherwise, credits cannot be awarded.

The credits are available for transfer only if the grandparent is under the state pension age, currently 66 years old, but claims can be backdated to 6 April 2011.

Applications for a specific tax year can only be submitted after 31 October of the following tax year.

To apply, complete the form CA9176, then print and post it to HMRC. The government says to “get all of your information together before you start” as the form is completed online and you can’t press save.

Greer adds: “More needs to be done to highlight that these credits are available and to educate people on how to correctly apply so they avoid rejection.

"If not, this unsung workforce of child carers will fail to benefit despite playing a critical role in keeping the economy going especially over the summer months when working parents struggle with the rising costs of childcare and grandparents step in to save the day.”