Can YOU claim ‘grandparent credits’ towards your state pension? Perk worth £275 a year for helping out with grandkids can be backdated to 2011
- A single credit adds £275 a year to a full state pension at today’s rate
- You can claim for looking after under-12s whose parents are paying NI anyway
- Parents also need to have registered for child benefit for grandparents to qualify
Grandparent credits: There is no minimum hours rule, and you could claim for ‘Zoom care’ during the pandemic
Applications are now open for grandparents to get a credit towards their state pension for helping out with childcare during the year to April 2022.
A single credit adds £275 a year to a full state pension at today’s rate, which is £185.15 a week or around £9,600 a year.
You can also put in a retrospective claim back to 2011 – potentially worth up to £3,000 a year in retirement.
The option is available if you were looking after under-12s whose parents were working and didn’t need credits towards their own state pensions going back over those years.
Parents also need to have registered for child benefit, although not necessarily to receive the payments as they can make a ‘credits only’ claim if one partner earns over the £50,000 limit.
The opportunity to claim the 2021/2022 credit only opened up from October 1 because it takes time to finalise National Insurance records, says former Pensions Minister Steve Webb, who is now This is Money’s agony uncle.
‘There is no minimum hours rule, so even a grandparent who perhaps drops a child at school and picks them up at the end of the day could qualify – and in lockdown, keeping them amused over Zoom counted.
‘Even better, you can backdate over a decade if you’ve been doing this for a long time, so there’s a potential financial goldmine here for some grandparents.’
The ‘Zoom care’ or distance provision applied during the 2019-2020 and 2020-2021 tax years, for grandparents who helped with childcare by phone or video while a parent worked during the coronavirus lockdowns.
Webb, who is now a partner at pension consultant LCP, says informal childcare by another family member is often what enables a parent to go out to work, especially given the high cost of formal childcare.
‘It is important that grandparents and other family members who provide this care do not damage their own state pension prospects as a result.
‘National Insurance credits help people to protect their state pension while doing valuable work such as looking after a child.
‘Now that applications are open for 2021/22, I would encourage anyone who thinks they might be eligible to put in an application. They should also think about whether they might have been entitled at any point since 2011.’
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 – please put CHILD BENEFIT in the subject line.
The Government rules on grandparent credits and application form are here, and Webb gave a full rundown of what you need to know in a This is Money column here.
He says the key things to remember are:
– There is no minimum hours requirement, and as long as the parent of the child confirms that care was provided by another family member, that person can benefit
– These are National Insurance credits towards future state pension entitlement, so they apply only to those who are currently under pension age
– Each year can add up to 1/35 of the full state pension to the carer’s final pension figure, and at current rates this is around £275 per year
– Signing over the NI credit costs nothing to the parent who is going out to work and making their own NI contributions – this NI credit is ‘going spare’
– Provided that the parent either claims child benefit, or even just claims the NI credits only – not the payments if they earn over the limit to qualify – the credits can be signed over
– Although the person caring for the child will often be a grandparent, other family members such as aunts and uncles can also apply.
Age UK also has a factsheet on its website here. The charity says: ‘If you are under state pension age, you can be entitled to a credit in place of a NI contribution, if you are a grandparent or other adult family member providing childcare for a child aged under 12.
‘Grandparent’s credits must be applied for after the end of the tax year following the one in which you are entitled to the credits.’
The rules for grandparents are 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. See the box above if this has happened to you or someone you know.
How much is the state pension?
The basic state pension is currently £141.85 a week, or around £7,400 a year. It is topped up by additional state pension entitlements – S2P and Serps – if accrued during working years.
The two-tier state system was replaced in 2016 by a new ‘flat rate’ state pension. This is currently worth £185.15 a week or around £9,600 a year.
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, make voluntary top-ups to buy extra qualifying years, and build up more 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.
Everyone gets the option of deferring their state pension to get more in their later years. You can check your NI record here.