GRANDPARENTS could be missing out on a £2,675 annual boost to their state pension, which could total £53,500 over their whole retirement.
If you look after your grandchildren you can claim credits that will contribute to your pension pot when you retire.
The money could be useful for grandparents taking care of the kids to help parents avoid big childcare costs when they’re working.
Grandparents can claim Specified Adult Childcare Credits that top up their National Insurance contributions.
If you don't claim the credits, you could see thousands of pounds wiped off your state pension.
The amount you could miss out on depends on individual circumstances.
According to investments and savings firm Hargreaves Lansdown, you could lose more than £53,500 over the course of a 20-year retirement.
Top tips to boost your pension pot
DON’T know where to start? Here are some tips from financial provider Aviva on how to get going.
- Understand where you start: Before you consider your plans for tomorrow, you'll need to understand where you stand today. Look into your current pension savings and research when you’ll be eligible for the state pension, and how much support you’ll receive.
- Take advantage of your workplace pension: All employers are legally required to provide a workplace pension. If you save, your employer will usually have to contribute too.
- Take advantage of online planning tools: Financial providers Aviva and Royal London have tools that give you an idea of what your retirement income will be based on how much you're saving.
- Find out if your workplace offers advice: Many employers offer sessions with financial advisers to help you plan for your future retirement.
This works out at £2,675 in missing money each year.
In order to qualify for the full new flat rate state pension of £179.60 a week, you need to have 35 years’ worth of National Insurance contributions or credits.
To get any state pension at all you need at least ten years’ of contributions.
Sarah Boles, personal finance analyst at Hargreaves Lansdown, said: "If you don’t have enough, then your years caring as a grandparent can make an enormous difference."
For example, someone with 30 years of National Insurance contributions will receive around £153 a week from their state pension.
If they spent five years looking after their grandchildren, but didn’t claim the credits, they would miss out on the chance to take them to the full 35 years.
Excluding inflation and pension rises, that could leave them more than £27,500 worse off during a 20 year retirement.
A grandparent who had 25 years of contributions and looked after grandchildren for ten years, but didn’t claim, would miss the chance to boost their pension from around £128 to £179.60 a week.
Over 20 years this could mean missing out on more than £53,500.
How it works
If a parent is claiming child benefit and is out of work to care for a child, they are automatically awarded National Insurance credits.
If the mum or dad goes back to work and a grandparent steps in to look after the child, the parent can sign the credits over.
If no one is claiming Child Benefit there is no attached credit to transfer – so the Specified Adult Care credits cannot be awarded.
Some families chose not to claim Child benefit because one parent earns between £50,000 and £60,000 meaning they'll need to pay some of the benefit back and complete a self-assessment tax form.
Families where one parent earns over £60,000 have to pay all the benefit back in extra income tax, meaning many don't bother signing up for child benefit.
But doing this can mean missing out on critical National Insurance credits, either for a stay at home parent, or for grandparents doing childcare.
This is because the credits are awarded for each Child Benefit claimant – not for each child.
Parents who earn over the threshold can still sign up for child benefit, but fill in a form that says they do not want to be paid.
This means they get the NI credits without any of the hassle of having to pay extra tax back or filling in assessment forms.
Credits can only be allotted to one person, even if lots of people are caring for a child.
That means only one parent can claim child benefit for each child, even if the parents are divorced or separated.
If two grandparents are providing care for the same child, only one can get credits transferred because there is only one Child Benefit claimant and one set of credits..
If two grandparents are looking after both their daughter's children, there may only be one credit available for transfer if the mum is claiming child benefit for both children.
In this situation, even though there are two children there's just one claimant and one set of credits.
But if the mum claims child benefit for the older child, and the dad claims it for the younger child, there will be two credits available as there are two claimants, so in theory each could be transferred to a different grandparent.
Equally, if the grandparents are caring for their daughter’s child and their son’s child, there will be two Child Benefit claimants and therefore two credits available for transfer.
During the pandemic, grandparents can also claim credits for care provided over the phone or on video calls.
How to claim
To claim Specified Adult Childcare credits you will need to complete an online application form.
You need to provide your personal details, as well as information about the child and the periods of care you provided.
As part of the application process you also need to input the personal details of the child's parent or the Child Benefit recipient.
Finally, both the applicant and the parent must both sign the form.
Specified Adult Childcare credits can be awarded retrospectively to 6 April 2011 at the earliest.
But you must have been under the state pension age of 66 when you cared for the child.
The government will not accept applications for any tax year until the following October at the earliest.
Carers are also able to claim a different National Insurance credit, which could top up their state pension payment by £5,000 a year.
Brits need a pension pot of £305,000 for a comfortable retirement, according to the latest research.
The government is proposing changes to the way pensions are taxed – check how the plans could impact you.
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