How to boost your state pension by looking after the grandkids this summer

Grandparents can earn extra National Insurance credits by providing summer childcare while schools are closed. Here is what you need to know.

grandad and grandson
Grandparents can earn extra National Insurance credits by providing summer childcare for their grandchildren
(Image credit: Getty Images)

The summer holidays are approaching and grandparents are set for requests to step in to provide free childcare while schools are closed.

Grandparents can provide a cost-free alternative to childcare compared with expensive summer camps, while they get bonding time with the grandkids. 

There can also be tax benefits beyond the happy memories though.

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Grandparents who take on additional childcare responsibilities may be eligible for extra National Insurance credits, which could boost their state pension.

“The summer holidays are a long stretch of potentially costly childcare for parents - grandparents often step in to help fill the gap," says Becky O'Connor, director of public affairs at PensionBee.

"This can unfortunately mean that some miss out not only on their own earnings, but on state pension entitlement, too."

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 that on average each year 19,616 people apply for the credit with around 15,400 applications proving successful. In total, 123,138 people have successfully claimed for the credit.

A record 29,967 applied for the credits between October 2022 and September 2023 and 22,575 were approved.

More recently, 22,701 applied between October 2023 and April 2024 and 17,318 were approved, suggesting there could be another record year of applicants.

“It is fantastic to see more grandparents and other family members take advantage of Specified Adult Childcare Credits,” says Jon Greer, head of retirement policy at Quilter.

“The numbers of people applying for the credit have been steadily climbing and last year saw the most people apply on record with this year set to top that.”

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 isn’t wasted.

If you are working and already receiving enough NI towards your own state pension, you can transfer the credit to someone in the family with a shortfall if they are helping with childcare.

There are certain criteria though and it can only be claimed for a child up to age 12 and by a mother or father who does not live with the child, a grandparent, great-grandparent or great-great-grandparent, aunt or uncle or brother or sister.

"It's a little known and underclaimed benefit," adds O'Connor.

"But for some grandparents the cost of not knowing about it can be lower income in retirement."

How Specified Adult Childcare Credits can boost your state pension

A grandparent looking after a grandchild up to age 12 can get the credit towards their own state pension, which can help fill any NI gaps and eventually boost their weekly payments.

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 grandparents may have to fight over the credit as it can only be earned per child.

It may be an argument for looking after more grandchildren through the summer though.

Additionally, the credit is only available if the parent is registered for child benefit.

“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

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.

You have to complete and post back form CA9176 to apply.

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.”

Marc Shoffman
Contributing editor

Marc Shoffman is an award-winning freelance journalist specialising in business, personal finance and property. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and The i newspaper. He also co-presents the In For A Penny financial planning podcast.