Grandparents – claim your state pension ‘babysitting’ credits
Family members who look after a relative’s children to allow them to go out to work may be able to increase their future state pension by claiming Specified Adult Childcare credit.
Many people look after their grandchildren to allow the children’s parents (or carers) to go out and work. This can mean that the grandparents are not building up entitlement to the state pension. Grandparents are probably the biggest group of such ‘family carers’ so we refer to them below. But other adult relatives such as an aunt or uncle can also make claims.
While the parent (or carer) is working, they are probably paying National Insurance contributions (NICs), even if they are paying at a zero rate. This is important because NICs build up entitlement to the state pension, among other benefits. But the parent (or carer) will also be receiving NIC credits towards their state pension, through a claim to child benefit. Even if the parent (or carer) has chosen not to receive the child benefit, perhaps because of the High Income Child Benefit Charge, they will still receive these NIC credits as long as they have claimed the child benefit.
How can this help the grandparents?
Some parents (or carers) will be receiving NIC credits as a result of their child benefit claims, but they do not need them because they are paying NICs through their employment or self-employment. This means it is possible for the ‘spare’ credits (Specified Adult Childcare credits) to be transferred to a relative who looks after the child to allow the parent (or carer) to work.
Those credits can count towards the grandparent’s eligibility for a state pension, provided that the individual wishing to claim the credits did not have a valid election in place to pay reduced NICs. This could be very valuable where the grandparent has not yet reached the maximum number of years required for a full state pension; or they could help a grandparent qualify for some state pension where they had not met the minimum number of qualifying years for a state pension.
This can only help if all of the following conditions are satisfied for the year for which it is intended to transfer the NIC credits:
- The grandparent (or other relative):
- has not already reached state retirement age;
- looks after a child or children under the age of 12 while the child or children’s parent or main carer is working;
- does not already have a qualifying year in their own right through their own contributions or NIC credits;
- is ordinarily resident in the UK;
- The parent (or carer) does not need the NIC credits from their child benefit claim for their own NIC record.
- Both the grandparent and the parent (or carer) make a joint claim at the relevant time (see below).
How do I know that the parent (or carer) does not need the NIC credits?
The simplest way is to check the National Insurance record of the parent or carer. They can only do this after the end of the tax year and the record is not likely to be fully up to date until October following the end of the tax year. This means that you would have to wait until October 2020 before you made the request for the tax year 2019/20. However, you could check now for the 2018/19 tax year.
In the meantime, you can get an indication by considering their pay from working.
Employees start paying NIC at a rate of 0% once they earn in excess of £118 per week; and pay at the rate of 9% once they earn in excess of £166 per week. Higher earners with earnings in excess of £962 per week pay NIC at 2% on earnings in excess of that amount. Provided the children’s parents (or carers) earn enough over the year, they will make up a ‘qualifying year’ towards their state pension. Any weeks when they earn less than £118 are excluded, but in order to get a qualifying year they need to earn only £6,136. That figure excludes any earnings over £962 in a single week. (All amounts here are for the 2019/20 tax year.)
For the self-employed, provided that they pay Class 2 NIC for the whole year, that will give the parents (or carers) a qualifying year towards their state pension.
How and when do we claim?
Both the person giving up the credits and the person claiming them need to complete and sign the claim form CA9176. As noted above, this cannot be actioned until at least October following the end of the relevant tax year – so October 2020 for the tax year 2019/20, but you could make the claim now for 2018/19.
Claims can be processed for as far back as the tax year 2011/12, so it is well worth making sure all relevant credits are claimed.
What other information may be useful to us?
It is the person who has claimed the child benefit who may be able to give up the NIC credits. This is normally the mother, but may not be.
Other people who might claim the credits include the partner of the child benefit claimant. They would claim on form CF411A.
There is only one set of NIC credits to be transferred so if more than one person is eligible to claim, they need to agree who will claim.
You can read more about Specified Adult Childcare credits on GOV.UK.