Are you missing out on £5,000 in ‘unknown’ benefits while caring for children?

A little-known scheme designed to help support families who share work and childcare could add hundreds of pounds to a carer’s state pension income, especially the two-thirds of grandparents who look after their grandchildren.

But few families are aware of the valuable perk, according to data obtained through a freedom of information request by mutual insurer Royal London.

Under a government scheme, a family member who is looking after a child under the age of 12 (or older if the child has disabilities) while the child’s parents are out at work can benefit from national insurance (NI) credit.

These credits are added to the NI record of the carer if they are still under state pension age and help them to build up a full state pension.

With separate research by SunLife this week revealing that a quarter of those approaching retirement are worse off than they expected to be and more than half of those in their 50s or older are financially supporting their children and or/grandchildren, the boost could go some way to alleviating the pressure. As long as families know about it.

Need to know

A parent who has gone back to work is likely to be paying NI in their own right and so no longer needs the NI credit that comes with receipt of child benefit. They can sign this over to the family member who is looking after their child, at no cost to themselves.

The scheme is known as the “specified adult childcare credit” because other family members, such as aunts and uncles, can also apply, not just grandparents.

Carers aren’t required to do a minimum number of hours to qualify and claims can be backdated – to the introduction date of the scheme if appropriate, which was in 2011.

Under the scheme, the child benefit recipient confirms that she (or he) no longer wishes to benefit from the NI credit that comes with the child benefit; this might be because they are out at work and paying NI contributions in any case, so do not benefit from the credit.

And it’s worth doing.

With about 44 per cent of grandparents alone currently under the state pension age and, therefore, eligible for the scheme, these credits can be of considerable value to someone who would not otherwise build up a full state pension – which requires 35 years’ worth of NI contributions. Millions of people are expected to retire on less than the full state pension due to a shortfall.

One year of NI credits can be worth 1/35 of a full pension. The full state pension is currently £8,767 per year, so 1/35 of that is around £250.

This means that someone who claims these credits for a year could get an extra £250 on their pension, or around £5,000 in total over the course of a typical 20-year retirement.

In the dark

In 2015/16, a freedom of information request revealed that just 1,298 grandparents and other family members were benefiting from the scheme. Following a burst of publicity, the number claiming rose to 10,084 by 2017/18, according to a new FOI response. But this is still thought to be a small fraction of all the people who could benefit.

The numbers who are missing out are not known precisely, but according to research by the charity Grandparents Plus, around two-thirds of all grandparents report that they spend time looking after grandchildren. With more than 7 million grandparents in Britain (of all ages) with grandchildren under 16, the 10,000 or so individuals who currently claim NI credits is likely to only be a small fraction of those who are entitled.

“While 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,” Steve Webb, director of policy at Royal London, who tabled the FOI, says.

“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.”

More information about the scheme is available on the government website. Grandparents Plus offers information and advice for grandparents in a range of circumstances, including providing childcare.