Tens of thousands of grandparents could be missing out on a little-known pension perk that would boost their income in retirement.
The high cost of childcare means increasing numbers of parents rely on relatives to look after their children so they can return to work.
But many carers do not realise they are entitled to valuable pension credits that could be worth thousands of pounds to compensate for their time.
Missing out: Fewer than 16,000 grandparents have signed up to Specified Adult Childcare credits scheme
Research by charity Age UK found that a fifth of grandparents over the age of 50 — or five million people — provide regular care for their grandchildren.
Yet exclusive figures from HM Revenue & Customs (HMRC) show that fewer than 16,000 of them have signed up to a scheme designed to help boost their pensions each year.
To claim the full new state pension, currently worth £185.15 a week, you need 35 years of National Insurance contributions.
You can build up your record by paying National Insurance on your earnings during your working life or by claiming National Insurance credits.
If you have children under the age of 12 and claim child benefit, you will automatically receive parents’ credits.
But if you have gone back to work you may not need them.
In this instance, you are permitted to transfer your entitlement to a family member who helps with childcare and may have a gap in their own National Insurance record.
These are known as Specified Adult Childcare credits — and can be very valuable.
Each year of credits is worth a year of National Insurance contributions or one-35th of the full state pension.
At current rates, this works out at £5.29 per week, £275 a year or around £5,500 over a 20-year retirement. You can also backdate claims as far as 2011.
Eligible family members include not only grandparents, but also aunts and uncles, siblings, cousins, parents who do not live with the child and the partners of those relatives.
There is no minimum requirement for the number of hours of care provided.
Research by charity Age UK found that a fifth of grandparents over the age of 50 – or five million people – provide regular childcare for their grandchildren
And you can even claim for childcare provided remotely during lockdown via phone calls, for example.
Yet just 15,311 people claimed Specified Adult Childcare credits between October 2021 and July 2022, according to HMRC.
Between October 2020 and September 2021, 15,927 applications were approved. There were a further 15,007 claims from October 2019 to September 2020.
HMRC says it does not know how many people could be entitled to the perk because it does not track how many people provide help with childcare.
But former pensions minister Sir Steve Webb, of consultancy firm Lane Clark and Peacock, says there could easily be 100,000 grandparents and other family members missing out.
Experts warn that, as well as a lack of awareness of the perk, the system is far too complicated.
To be eligible for the credits, parents must continue to claim child benefit or tell HMRC they still want to receive the credits.
Families are entitled to child benefit if both partners earn less than £50,000 a year.
If one or both earn more than this, they must pay back part or all of the benefit via the high-income benefit charge.
Pension credits: To claim the full new state pension, currently worth £185.15 a week, you need 35 years of National Insurance contributions
This has proved controversial over the years, with thousands of families stung by hefty penalties after not realising they needed to repay the money.
Many have since opted out of the benefit altogether as a result.
But this means they have also lost their right to National Insurance credits.
And unless they fill in a form, relatives who help with childcare are also unable to claim.
What’s more, child benefit claims can be backdated for only three months, which means that carers could miss out on thousands of pounds.
Sir Steve Webb says: ‘With childcare costs being so high, family care is often the only way that people can afford to work, and it would be a shame if the family member who provides this damaged their own state pension record as a result.
‘These transferable credits help to overcome that problem. But the system only works if the child’s parent either claims child benefit or at least claims the National Insurance credits that would go with it.
‘This is a free and simple way for families to support each other, and I would encourage any family who could benefit to find out more and put in a claim.’
You must fill in a form (gov.uk/government/publications/national-insurance-application-for-specified-adult-childcare-credits-ca9176) to claim Specified Adult Childcare credits.
The child’s parent is also required to countersign the document to confirm you cared for their child during the specified period, and that they agree to transfer their credits to you.
You will get one credit per household. So if you care for two children from the same household you can claim only once.
But if you look after two children from different families, you can make two claims.
For more information, contact Age UK’s free advice line on 0800 169 65 65.
