Research from Halifax shows that 10% of grandparents help look after related children on a daily basis.
If you are one of them, you could be eligible for credits which will boost the State Pension you receive later.
They’re known as Childcare National Insurance Credits, and there are around 100,000 grandparents who are eligible to claim them. Unfortunately, just 19% of those, do (Source: Department for Work & Pensions ).
What are National Insurance Credits?
National Insurance Credits are awarded in place of regular National Insurance contributions. They are included in some state benefits and can be awarded in other situations where you are not able to work for certain reasons.
In some instances, credits are automatically added to your record, but in other cases, including if you are a grandparent caring for a child, you will need to take action and apply for them to be added to your record.
How do Childcare National Insurance Credits work?
Childcare National Insurance Credits are available for adults aged over 16, who provide care for a child under 12. You can receive one Class 3 National Insurance Credit per week, or part week, in which you care for a child who does not normally live with you.
You may be eligible to claim Childcare National Insurance Credits if:
- You are a grandparent who cares for a child under the age of 12 on a regular basis
- You were under the State Pension Age during the year you are claiming Childcare National Insurance Credits for
- The child’s main carer (usually a parent) is receiving Child Benefit, but does not need the Class 3 National insurance Credits, as they have received Credits for the year automatically
The child’s usual carer will need to countersign your application to confirm that you have cared for the child and that they agree to you receiving the Class 3 National insurance Credit.
Childcare National Insurance Credits are applied retrospectively. You must apply for them to be added to your record from the October following the end of the tax year they will apply to.
Why are National Insurance Credits important?
The amount of State Pension you receive relies entirely on your National Insurance contributions. To receive the full New State Pension, you will need a total of 35 qualifying years on your National Insurance record. However, the rules are complex, and the most sensible course of action is to:
Qualifying years are periods where the full contributions have been made, or there are enough Credits in place to equal the full contribution.
If you have fewer than the required qualifying years, you will receive a lower State Pension. That may mean that your overall retirement income is reduced and that your expectations and plans need to be changed to reflect that.
Factoring the State Pension into your retirement planning
The State Pension will form the foundation of your retirement income one you reach State Pension Age. Therefore, making the most of any available credits, to ensure that you receive as much as possible, is the logical thing to do.
Even if you don’t think you will need to rely on the State Pension too heavily, there’s no harm in taking as much as you can get and leaving it for future generations or giving it away.
National Insurance Credits for those who aren’t grandparents
If you know someone who looks after a child who is not a dependent, they may be eligible for Childcare National Insurance Credits. Furthermore, if someone you care about has children but is not claiming Child Benefit they are eligible for, it may be worth talking to them.
Some stay-at-home mums choose not to claim due to their partner’s earnings being over the threshold. However, they miss out on the Class 3 National Insurance contributions which are automatically awarded alongside.
These credits go a long way toward ensuring women have fair access to the State Pension, especially as recent research from Prudential has shown that women’s retirement income is £5,000 less than men’s, on average.
Your next steps
If gaps in your National Insurance record are likely to affect your retirement income and planning, you need to find ways to bridge the gap and bring your record up to date. This may include:
- Claiming for National Insurance Credits you may be eligible for
- Making voluntary contributions to boost your record
- Continuing to work until you reach enough qualifying years
If you are not affected, but think your children, friends or colleagues might be, we encourage you to share this article and potentially help them to have a more rewarding retirement.
To discuss your retirement planning, or to talk about how caring for children might impact you financially, please give us a call.