Looking after grandchildren is something many people enjoy. But few are aware that it can mean losing a substantial amount from their state pension. The good news is that there is a little-known scheme, which could give them back the thousands of pounds that would otherwise be lost.
According to Sir Steve Webb, former Minister of State for Pensions and Liberal Democrat MP, thousands of grandparents who provide childcare, are missing out on National Insurance credits that could boost their state pension.
Now Director of Policy at mutual insurer Royal London, Sir Steve Webb points to a freedom of information request to HM Revenue & Customs. It showed that up to 100,000 grandparents, who help their children get back to work after the birth of a grandchild, are unaware of a scheme designed to ensure their pensions don’t suffer.
The government launched the grandparents’ credit scheme, officially known as Specified Adult Childcare credits, in 2011. Parents, usually mothers, but potentially fathers (depending on who is the main carer) who sign up to Child Benefit, automatically qualify for National Insurance credits. These count towards their state pension if they do not go back to work and earn National Insurance credits.
Mothers who do go back to work, with the help of grandparents providing childcare, can pass on these National Insurance credits to the grandparent.
Will you lose out on more than £4,500?
It means that if a mother goes back to work after the birth of a child, she can simply sign a form that allows a grandparent, or other family member, to receive NI credits for looking after the child, provided the child is under the age of 12.
A grandparent of working age who misses one year of NI contributions, because they spend time with a grandchild instead of doing paid work, would lose 1/35th of the full rate of state pension, equivalent to £231 per year.
This means that working-age grandparents, who don’t take advantage of the scheme, could lose more than £4,500 over the course of a 20-year retirement.
The scheme is simple to arrange, but the based on the figures from HMRC, it seems that it is so little known that just 1,298 grandparents and other family members across the country benefited in the year to September 2016.
Webb, and Royal London are calling on the government to improve public awareness, so that new mothers and grandparents are aware of the scheme.
The insurer estimates that around 1.27 million working mothers with children under 12 rely on a grandparent for childcare. Around 230,000 of these mothers are in their 20s, with the grandparent likely to be below state pension age. Some grandparents would still be working themselves, but even if only half could benefit from the scheme it would still mean more than 100,000 would be able to improve their pension prospects.
Webb explained the need for more people to take action. “Many families rely heavily on the support provided by grandparents to enable them to combine paid work and family life,” he said.
“The fact that there is a scheme to make sure that grandparents do not lose out by protecting their state pension rights, is a good thing. But the scheme is not much use if hardly anyone takes it up. The government needs to act quickly to alert mothers to the fact that they can sign over the NI credits that they do not need.”
The charity Grandparents Plus believes grandparents are a lifeline to families squeezed by falling incomes and rising childcare costs. They comment: “When they give up their own jobs to help out, they shouldn’t damage their future state pension in the process.”
You can apply for Specified Adult Childcare credits if:
- You are a grandparent, or other family member caring for a child under 12
- You were over 16, and under state pension age when you cared for the child
- You are ordinarily resident in the United Kingdom
- The child’s parent (or main carer) is entitled to Child Benefit
- The child’s parent (or main carer) agrees to your application
You can find out more about the scheme by clicking here.
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