Did you know that generous grandparents who have not yet hit the State Pension age and who care for their grandchild(ren) to enable the parents to go back to work could be missing out on £231 per year towards their State Pension? To put that into cold cash terms, that is around £4,600 over a 20-year retirement, so it’s a lot to be missing out on! According to the Department for Work and Pensions, only 1,300 people UK wide are taking advantage of this when in fact nearly 100,000 are eligible.
What is it?
This scheme – officially known as the Specified Adult Childcare Credits scheme, but called the Grandparents' Credits for ease – was introduced in April 2011, but is still widely unknown, meaning thousands of grandparents are missing out on valuable National Insurance (NI) credits towards their State Pensions per year. Steve Webb, Directory of Policy at Royal London, released a press statement stating that there are over 100,000 potential people missing out on this scheme every year.
Why does this matter?
With many people becoming grandparents in their 50s and 60s, and with rising State Pension ages, the argument is that grandparents could still qualify for NI credits through work which they are giving up to care for their grandchild.
How does it work?
Anyone in receipt of Child Benefit for a child under 12 automatically gets NI credits towards their State Pension. So if a parent goes back to work and pays NI, they don't need the NI credits they are receiving from the Child Benefit as they are qualifying through work. This Government scheme allows for a parent to sign a form and pass the NI credits to the grandparents or other family member who is actually looking after the child – ensuring none of those precious NI qualifying credits go to waste.
You currently need 35 years of qualifying NI contributions to be eligible for the full State Pension. Under this scheme, one year of credits equals one of the 35 contributing years, so it’s worth filling out the form. You can check the eligibility and how to claim, as well as when to apply, in this handy DWP information sheet. It’s not a complicated application. Just be aware that the application can only be made the following October after a particular tax year. For example, to apply for the credits during the tax year of 2016/2017, the application must not be made until October 2017.