Q. My mother is 59 and helps care for my children by doing the school run and looking after them until I’ve finished work. I’ve heard that she’s able to claim National Insurance credits to build entitlement to the state pension. Is that true?
Submitted by Louise Lloyd, from Oldbury, via the Which? Money Helpline
A. This is a timely question. It’s estimated that as many as 100,000 grandparents lending a hand with childcare could be missing out on a valuable way of boosting their state pension by claiming National Insurance credits.
Let’s start with why upkeep of your National Insurance record is so important. You need at least 10 years’ worth of National Insurance contributions to qualify for any state pension at all, and 35 years’ worth to get the full state pension, currently worth £159.55 a week.
You build your National Insurance record up by making contributions taken from your salary. But if you’ve stopped working, you can still build up entitlement to the state pension through ‘Class 3’ National Insurance credits.
For example, if you’ve stopped working to raise a child under 12, and you claim child benefit, you’ll automatically receive National Insurance credits. This is called a ‘Parent’s credit’.
Carers also get credit paid to them automatically, if they are looking after someone in receipt of Disability Living Allowance, Attendance Allowance or a Care Certificate. Similarly, people who are ill or disabled, and are in receipt Employment and Support Allowance or Unemployability Supplement or Allowance will also receive automatic credits.
Can grandparents claim National Insurance credits?
The good news is that your mother can claim credits now that you’re at work.
But the reason why thousands of grandparents are potentially missing out on National Insurance and consequently, risking getting a lower state pension, is because credits aren’t applied automatically.
Instead, they have to apply for what’s known as ‘Specified Adult Childcare’ credits. These are payable when a parent gets a qualifying year of National Insurance contributions (because they are back at work and paying out National Insurance) and, therefore, doesn’t need to claim a Parent’s credit.
Essentially, you hand over your credit to your mother.
According to the government guidelines, your mother will need to complete an application form, which requires the following details:
- your mother’s personal details
- your children’s details and the periods when your mother looked after your children
- your personal details
- and both you and your mother need to sign a declaration.
She claim make a claim for credits online, using HMRC’s form.
How far back can grandparents claim?
This useful credit was introduced in 2011, and your mother can claim for credits she may have missed dating from six years ago.
That could be potentially very lucrative when it comes to claiming the state pension. One year’s worth of contributions is the equivalent of £4.55 in weekly state pension (1/35th of £159.55). Six years’ worth adds up to an extra £27.30 a week, or £1,419 a year.
Over a 20-year retirement, that could earn your mother an additional £36,000, assuming an annual increase of 2.5%.
One thing to note is that your mother can only apply for a credit in the October following the end of a tax year. The government says that, for example, to claim for a credit from the 2016/17 tax year, applications can only be made from October 2017.