A grandparent who looks after a grandchild, so that the child’s parent can go back to work, can boost the amount of state pension they receive.
By applying for a national insurance credit, a grandparent looking after their grandchild for one year could add £230 per year to their state pension, or £4,500 over a typical 20-year retirement, according to Royal London.
The credit would mainly be relevant to grandparents, but could apply to other family members such as uncles and aunts. The person who does the caring needs to be under the state pension age.
There has been an almost sevenfold increase in the number of people claiming the credit over the last year. But Royal London estimates that thousands are still missing out, as only 1 in 10 of those who are eligible apply for it.
The cost of childcare in the UK is so high that some working parents end up paying more for childcare than they take home. The average cost of a full-time nursery place is an eye-watering £1012 per month in Britain, and an even higher £1330 per month in London, according to figures from the Money Advice Service.
As a result, some women are forced to drop out of work after having a child, which further exacerbates the pay gap between men and women, and also leads to women having lower pension incomes. That’s why grandparents step in to look after their grandchildren so that their child (usually their daughter) can go back to work.
The way the system works is that the person receiving child benefit for the child (usually the mother) signs over the national insurance credit she receives as a child benefit recipient to the grandparent. The mother does not need the credit herself because she is back at work and paying national insurance contributions.
Steve Webb, director of policy at Royal London, says: ‘It is right and proper that when grandparents sacrifice their own working life to help a family member get back to work, they should not also damage their own state pension prospects.
He adds: ‘This national insurance credit is a valuable right and it is good news that the numbers claiming have risen so dramatically in such a short space of time. But we believe that there are tens of thousands more grandparents who could be entitled to benefit and would encourage more of them to find out about the scheme and to make a claim.’
The formal title of this national insurance credit is the ‘Specified Adult Childcare Credit’, and details of how to apply can be found here.
A National Insurance helpline is available for those with queries:
Phone: 0300 200 3500
Textphone: 0300 200 3519
Monday to Friday, 8am to 8pm, Saturday, 8am to 4pm.
This article was originally published in Money Observer on 21 March 2018: http://www.moneyobserver.com/news/21-03-2018/grandparents-can-claim-pension-boost-looking-after-grandchildren