Many grandparents and family members who provide childcare for children could be missing out on a National Insurance credit, says a leading insurance company.
Although the numbers of grandparents and other family members who help with childcare claimed National Insurance credit for doing so, many more are missing out because of a lack of awareness of the scheme, according to a leading insurance company.
Royal London says that figures released to it under the Freedom of Information Act show more than 10,000 grandparents and other family members received help with their state pension in 2017/18 for looking after grandchildren – a sevenfold increase on two years ago.
Under a government scheme, a family member who is looking after a child under 12 while the child’s parents are out at work can benefit from a National Insurance credit. The parent (who has gone back to work) is likely to be paying NI in their own right and so no longer needs the NI credit that comes with receipt of child benefit. They can sign this over to the family member who is looking after their child, at no cost to themselves.
Such credits are added to the National Insurance record of the grandparent (if they are still under state pension age) and help them to build up a full state pension.
In 2015/16 a Freedom of Information request by Royal London revealed that just 1,298 grandparents and other family members were benefiting from the scheme. Following a burst of publicity, the number claiming rose to 10,084 by 2017/18, according to a new FOI response, but Royal London says this is still thought to be a small fraction of all the people who could benefit. Royal London cites figures from Grandparents Plus which show around two thirds of the UK’s 7 million grandparents report that they spend time looking after grandchildren.
Steve Webb, Director of Policy at Royal London, who tabled the FOI, said: “Whilst it is great news that thousands more grandparents are now benefiting from this scheme, the numbers are still a drop in the ocean out of all those who could benefit. It is increasingly common for grandparents to spend some time each week looking after their grandchildren, often to enable a parent to go out to work. It would be quite wrong if these grandparents suffered financially in terms of their own state pension as a result. This scheme needs to be much better publicised and I would encourage any family with a grandparent under pension age who helps out with the childcare to find out more.”
Royal London says one year of credits can be worth 1/35 of a full pension (because 35 years of contributions are needed for the full rate). The full state pension is currently £8,767 per year, and 1/35 of this is around £250, meaning someone who claims these credits for a year could get an extra £250 on their pension, or around £5,000 in total over the course of a typical 20-year retirement.
The scheme is known as the ‘specified adult childcare credit’ since other family members such as aunts and uncles can also apply, not just grandparents. Under the scheme, the child benefit recipient can sign to indicate that she (or he) no longer wishes to benefit from the NI credit that comes with the child benefit; this might be because they are out at work and paying NICs in any case, so do not benefit from the credit. There is no minimum hours requirement, and claims can be backdated to when the scheme was first introduced in 2011.
*More information can be found here.