Hundreds of thousands of grandparents and other family members could be missing out on valuable credits towards the state pension worth around £250 a year during retirement, new research reveals.
Some 10,000 people a year who help mums and dads with childcare are now applying for the credits – a huge jump on the 1,300 who did so in 2016.
But this is ‘a drop in the ocean’ out of the number who could benefit, according to pension giant Royal London, which obtained the take-up figures via Freedom of Information requests.
State pension credits: There is no minimum hours childcare requirement for making claims, and anyone applying now can still get them backdated to 2011
The full state pension is currently £168.60 a week, or around £8,800 a year. Each credit is worth 1/35 of the value of the state pension – around £250 per year or £5,000 over the course of a typical 20-year retirement.
Under the rules, parents – usually mothers – who sign up for child benefit automatically qualify for National Insurance credits that will count towards their eventual state pension if they don’t go back to work and earn them that way.
But when parents do go back to work, often as a result of the free help provided by grandparents or other family members, they have the option to pass on these credits to the person looking after their children.
The child or at least one of the children being looked after must be aged under 12, but there is no minimum hours requirement for claiming credits.
Anyone applying now can have credits backdated to 2011 when the scheme was introduced.
Aunts, uncles, siblings and other family members helping with childcare can also claim the officially named ‘Specified Adult Childcare’ credits.
However, only one person can do so per year, and they must be under state pension age (see the list of those who qualify below and the full rules here. ).
This makes the regime far less rigid than for mums and dads claiming state pension credits for looking after under-12s themselves.
This is Money is campaigning on behalf of parents who miss out on credits towards their state pension, if they fail to apply for child benefit because they don’t qualify for the payments, or make innocent blunders like putting the ‘wrong’ partner who is working down on their form.
Child benefit and the state pension
This is Money is campaigning on behalf of parents who end up with a smaller state pension because of mistakes over child benefit forms.
Have you lost state pension by not signing up because you don’t qualify, or putting the ‘wrong’ partner’s name down?
If this has happened to you, contact email@example.com and tell us your story.
Steve Webb, former Pensions Minister and now policy director at Royal London, believes up to a million grandparents could qualify for credits – much higher than his previous estimate a couple of years ago – meaning only a tiny fraction are now benefiting due to low awareness of the transfer option.
Webb says: ‘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.’
A Department for Work and Pensions spokesperson said: ‘The number of people receiving Specified Adult Childcare Credits has risen substantially since they were introduced in 2011.
‘We encourage everyone who might benefit to apply for the credits to which they’re entitled and extensive information on how to apply can be found on GOV.UK.’
Who can get state pension credits if a parent doesn’t need them?
It’s not just grandparents who can get free state pension credits. Family members who look after a relative under age 12 can claim ‘Specified Adult Childcare’ credits if they are:
1) A mother or father who does not live with the child (‘non-resident parent’)
2) A grandparent, great-grandparent or great-great-grandparent
3) A brother or sister
4) An aunt or uncle
5) A husband or wife or former husband or wife of anyone in 1 to 4
6) A civil partner or former civil partner of anyone in 1 to 4
7) A partner or former partner of anyone in 1 to 6
8) A son or daughter of anyone in 5 to 7
9) In respect of the son or daughter of anyone in 4, that person’s:
* husband or wife or former husband or wife
* civil partner or former civil partner, or
* partner or former partner
For 3 (in relation to the child) and for 4 (in relation to the parent):
* A half-brother or half-sister
* A step-brother or step-sister
* An adopted brother or an adopted sister
For 7, a partner is the other member of a couple consisting of:
* A man and woman who are not married to each other but are living together as husband and wife, or
* Two people of the same sex who are not civil partners of each other but are living together as if they were civil partners
Webb says the best source of information about grandparents is the 2009 British Social Attitudes Survey, which was analysed by the charity Grandparents Plus in a 2011 report called ‘Doing it all’.
The report suggests there are seven million grandparents with children aged under 16, and roughly half of these grandparents are aged under 65 and therefore potentially entitled to NI credits, giving a figure of 3.5million, according to Webb.
Around two thirds of grandparents with children under 16 spend time looking after them, which gives a figure of around 2.3million, but only one grandparent can claim the credits for the same grandchild, which gives a figure of roughly 1.1million, he says.
But Webb explains this will be on the high side, because it will include some cases where the youngest grandchild is 13 or over, some where one parent isn’t in paid work so can’t transfer their credit, and some where the grandparents are both also in paid work so don’t need the NI credit.
How much is the state pension?
The basic state pension is currently £129.20. It is topped up by additional state pension entitlements – S2P and Serps – accrued during working years.
The two-tier state system has changed for people retiring since 6 April 2016, when it was replaced by a new ‘flat rate’ state pension. This is currently worth £168.60 a week.
People who have contracted out of S2P and Serps over the years and retire after April 2016 get less than the full new state pension.
But they can fill gaps in unpaid and or underpaid National Insurance in previous years, and build up more qualifying years if they have enough time between now and state pension age.
Workers needed to have 30 years of qualifying National Insurance contributions to get the old state pension, but they now need to have 35 years of contributions to get the new flat rate state pension.
But even if you paid in full for a whole 35 years, if you contracted out for some years on top of that it might still reduce what you get.
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