Taking care of the grandkids and your State Pension
The school term is well underway, those new uniforms are starting to fit a bit better and everyone is getting settled into a routine. Working parents will also be weaving together a complicated web of formal childcare combined with help from friends and family to cover the school run and after-school care. Pension planning falls off everyone’s priority list, as school costs and practicalities need immediate attention. However, there is a little-known National Insurance provision that could offer a bit of help to some of the unpaid army of grandparents, aunties and uncles helping out with childcare at any time of the year. And what better time to look into it than today, National Grandparents’ Day.
Entitlement to the State Pension is linked to an individual’s National Insurance record over their working-age lifetime. Employees and self-employed workers pay National Insurance contributions from their earnings. But for people claiming benefits due to illness or unemployment, National Insurance credits are instead available to maintain entitlement to the State Pension.
Many people have an incomplete National Insurance record for myriad reasons: gaps in paid employment, periods of earning below National Insurance thresholds, time spent living abroad, or early retirement or redundancy. An individual with an incomplete National Insurance record can pay voluntary National Insurance contributions in cash, buying their entitlement to a full State Pension with top-up payments before they reach State Pension age.
However, for some grandparents (and other family members who provide childcare) there may be another option. Formally known as the Specified Adult Childcare Credit, these National Insurance credits are transferrable from a main parent or carer to a grandparent or other family member who provides some childcare for a child under 12.
Child Benefit is available to anyone responsible for a child under 16 (or 20 if in education or training) and includes National Insurance credits for the parent or carer. It is these credits that may be available to transfer, as long as the original recipient doesn’t need them. In practice, childcare is often necessary because a main parent or carer is at work, and so is already making National Insurance contributions from their own earnings. This means that the main carer does not actually need the National Insurance credit that comes with Child Benefit, and so it can be transferred to someone else who does need it.
The National Insurance credit can be claimed by a wide variety of family members or their partners. It’s available for any week or part week of childcare, and for any number of weeks in a year. Applications can be back-dated to 2011, plugging a sizeable gap that might otherwise cost hundreds or even thousands of pounds in up-front voluntary contributions.
For anyone considering voluntary cash payments to plug gaps in an incomplete National Insurance record, completing a very simple form might provide a no-cost option to build a full State Pension entitlement.
The factsheet and form are available from the Department for Work and Pensions website, which also details the helpline number for questions about your own circumstances.
