How grandparents could increase their state pension

While schools are closed, grandparents may be able to increase their state pension entitlement and earn additional National Insurance credits by offering childcare

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One of life's greatest rewards is spending time and developing a relationship with your grandchildren.

There may be financial advantages in addition to the inherent reward of spending time with your grandchildren.

Eligible family members, like grandparents, may be able to claim National Insurance credits if they take on extra childcare duties.

For retirees with gaps in their National Insurance record, these credits may increase their state pension.

According to Quilter's analysis, more people are applying for the tax benefit known as Specified Adult Childcare Credits (SACC).

A Freedom of Information request made by the wealth manager to HMRC reveals that, on average, 19,616 people apply for SACC annually, with about 15,400 of those applications being accepted.

Between October 2022 and September 2023, 22,575 individuals received the credits; however, in 2023 - 2024, that number drastically increased to 33,675 recipients.

The credits "ensure that family members stepping in to support childcare don't miss out on valuable contributions towards their state pension," according to Lisa Picardo, chief business officer UK at PensionBee.

"These credits acknowledge the important role that family carers play not only in their own families but also in the broader economy," she continued. "In today's society, informal childcare is crucial in helping parents stay in the workforce."

"A lot of people don't know that doing childcare alone can qualify them for credits that could be worth thousands of pounds in retirement. We strongly advise anyone interested in this role to apply and verify their eligibility.

Adult Childcare Credits: What Are They?

Launched in 2011, Specified Adult Childcare Credits allow a parent who receives Child Benefit to transfer the National Insurance (NI) credit to a grandparent or other eligible family member.

If you are employed and already contributing enough National Insurance to your own state pension, it is a helpful method to make sure the NI credit you can receive from Child Benefit for a child under 12 isn't wasted.

The unneeded credit can be transferred to another family member who may have a deficit in their National Insurance record through the program.

Although the credits seem ideal for grandparents in need of additional National Insurance credits, there are some requirements to take into account.

Only eligible family members may claim the benefit for a child under the age of twelve.

The definition of an eligible family member is a:

A parent or guardian who does not reside with the child, a great-grandparent or great-great-grandparent, an aunt, uncle, brother, or sister (including a half-brother or half-sister, a step-brother or step-sister, or an adopted brother or adopted sister), or any of the following may also be eligible as a family member.

Son or daughter of any of the individuals in the list above who are currently or previously spouses, partners, or civil partners. As long as:, you are eligible to apply for Specified Adult Childcare Credits.

You are an eligible family member who looked after a child under the age of twelve. You were sixteen years old and older when you looked after the child, but you were under state pension age. You normally reside in the UK, but not in the Channel Islands or the Isle of Man. The child's parent or primary carer has already claimed Child Benefit and does not require the National Insurance credits themselves. The child's parent or primary carer accepts your application. They must countersign the form to show that they agree that you looked after their child for the designated amount of time, and they are happy that you can have the credits.

How your state pension can be increased by Specified Adult Childcare Credits.

The full basic state pension requires 30 years of NI contributions, while the full new state pension requires 35 years. You must also have contributed for at least 10 years to be eligible for any state pension.

In order to fill in any gaps in a National Insurance record and increase state pension entitlement, applying for SACC credits may be a good option.

According to Quilter, SACC has the ability to raise a state pension by 328 per year.

This could add up to more than 6,000 in benefits over a typical retirement.

There is only one credit available per Child Benefit claim, regardless of the number of children on the claim, but there are no set hours needed.

For instance, only one credit can be transferred if two grandparents looked after their daughters' two children.

There will be two Child Benefit recipients and, thus, two credits that can be transferred if they cared for both their son's and daughter's children.

"If you have gaps in your National Insurance record, these credits are not only essential for obtaining the full state pension, but they are also a cost-effective method of doing so, versus paying to fill in missed years," Greer continues.

It is important to note that the claim is unaffected by the number of hours a grandparent assists with childcare. Eligible grandparents ought to be able to make a claim, even if it's only once every week.

How to apply for certain credits for adult childcare.

It is necessary to have claimed Child Benefit in order to transfer the National Insurance credit. Credits cannot be granted otherwise.

Although claims can be backdated to April 6, 2011, the credits can only be transferred if the grandparent is younger than the state pension age, which is currently 66.

Only after October 31 of the subsequent tax year may applications be filed for a particular tax year.

Fill out the CA9176 form, print it, and send it to HMRC to apply. According to the government, you should "get all of your information together before you start" because the form is filled out online and you are unable to save it.

"More has to be done to make people aware that these credits are available and to teach them how to apply properly so they don't get rejected," Greer continues.

"This unsung workforce of child care providers will not benefit even though they are vital to the economy, particularly during the summer months when working parents find it difficult to keep up with the rising costs of childcare and grandparents step in to help."