How looking after the grandchildren* could help your state pension entitlement (*other relationships are available!)

Shaun Davison
Tax, News
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With the increasing cost of childcare, it’s not uncommon for hard-pressed parents to turn to their family, especially grandparents, for help with looking after the children.

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If you agree to help, you’ll know that this can feel like a full-time, if unpaid, job, and it may well mean that you can’t go out to work yourself.  Recognising this, a rule was introduced in 2011 which means that if you provide care for youngsters within your wider family, you may be able to claim National Insurance (NI) credits which could enhance, or even enable, your entitlement to state pension in the future.  There are, of course, conditions to the claim but as you can claim as far back as 2011/12, it could make a significant different to the amount of pension you get in the future.

What are NI credits for these purposes?  

When a parent claims Child Benefit for their children but does not earn enough to make actual National Insurance contributions (NIC), either self-employed or employed, then they are entitled to NI credits which will allow them to claim certain state benefits, including state pension in the future.  However, if that parent works enough to pay contributions or be deemed to have paid them, they don’t need the additional credits obtained through Child Benefit. 

How does the transfer work?  

The Specified Adult Childcare Credits rules allow for that NI credit to be transferred to another family member [the carer] who is providing the childcare which allows the parent to work.  This can be particularly helpful if the carer wants to enhance their own entitlement to state pension, or fill any gap years, perhaps in the period between ‘retiring’ and being eligible for the state pension.  There is a potential claim for each Child Benefit claimant (not each child) so if two grandparents care for their daughter’s two children, there is only one credit available for one of the grandparents, whereas if they care for their daughter’s child and their son’s child, there are likely to be two benefit recipients and two credits available for transfer, one to each grandparent.

What are the conditions for the parent?  They need to:

  • Have claimed Child Benefit (even if they have decided not to receive the money, perhaps because of the High Income Child Benefit rules)
  • Not be using the NI credits themselves – this would generally be because they are earning at a sufficient level to be making NI contributions, broadly £6,396 or more during 2022/23.
  • Have arranged for childcare to be provided by a family member – There are no definitions of the period/form of that care.

What are the conditions for the carer?  The carer needs to:

  • Be over 16 but under state retirement age.
  • Be ordinarily resident in the UK.
  • Look after a child/children aged under 12 – there is no condition relating to the number of hours/days on which the care is provided.  There are no specific definitions of the form of the care and, for 2019/20 and 2020/21, special rules included periods when care had to be provided at a distance during the Covid-19 pandemic.
  • Not have a qualifying NI year for the year of the claim – that is, not be either paying NIC themselves or claiming NI credits in their own right.  Consequently, grandparents with earnings over £6,396 per annum will not qualify, but those with no such income but with significant levels of investment income may still qualify.
  • Be a family member – this is widely defined, including grandparents, siblings of the parents or children, step relations and partners or former partners thereof.   

How do I know my NIC position?  

The easiest way is for the parent (or carer) to check their NI record.  This can only be done after the end of each tax year and the record is not generally fully updated until October following the end of the tax year.

Making the claim:

  • Because of the delay in confirming the NIC position of both the parent and the carer, you can’t make a claim for, say, 2021/22 until October 2022.  However, you could make claims relating to earlier years, going back as far as 2011/12 (provided all the conditions are met in each year).
  • The claim has to be made jointly by the parent and the carer on Form CA916 and sets out details of both parties, the child or children and the care provided.  Note that if the partner of the parent who made the original Child Benefit claim wants the credits, they have to complete a different form – CF411A

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