I would really appreciate some clarification on the scheme that allows a family member to allocate their unused National Insurance contribution to grandparents who look after grandchildren to allow their adult children to work.
I understand that working parents who are eligible and claim child benefit (and who also receive pension credits through paid employment) can only benefit from one type each year so the other is lost.
However, they can sign over the unused one to a grandparent who helps to look after the children for work purposes.
Childcare: How often do I need to care for my grandchildren to get free state pension credits? (Stock image)
Please can you tell me how this scheme works? How often must you care for your grandchildren? Does looking after them after school and when they cannot attend nursery or school or for covering changes in work patterns (such as on call) and during school holidays count?
I am concerned that if my adult children give me their NI contribution it might harm their future state pension and does it depend on how long they have been claiming the benefit for their children – eight years seems to stick in my mind?
Also does it depend on how much they earn or how many hours they work?
I am sure there are many grandparents out there who are unaware of this scheme or who have similar questions. Any advice would be very much appreciated.
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Steve Webb replies: The scheme that you are describing came into being in April 2011 but is still not well known, so I’m pleased to have this opportunity to draw attention to it.
As you say, the idea is to allow a working parent who is receiving child benefit to allocate the National Insurance credit which comes from receiving child benefit to another family member who is helping to look after that child.
In many cases that family member will be a grandparent, but the scheme covers a long list of other family members such as aunts and uncles.
For this reason, although the scheme is informally known as a system of ‘grandparents credits’, the official title is the ‘specified adult childcare credit’.
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The first stage is to identify a National Insurance credit that is not being used.
A typical example would be a parent (most commonly a mother, but not necessarily) who is receiving child benefit and also in paid work.
Receipt of child benefit for a child under 12 generates a credit towards someone’s National Insurance record.
But being in paid work and earning more than the lower earnings limit (currently £120 per week) also means that your National Insurance record is protected.
In such a situation, the NI credit that comes with the child benefit is going spare, and the parent loses nothing by signing it over to someone else.
The person receiving child benefit can complete a form and sign over this spare credit to a ‘specified adult’ who is helping to look after the child.
There is no requirement for a minimum number of hours of care.
Indeed, during the Covid-19 pandemic, HMRC indicated that for 19/20 and 20/21 they would even count childcare via video link, given the restrictions on family members getting together in the same place.
To benefit from receiving the credit, the person doing the childcare has to be under pension age, as NI credits do not count for years beyond pension age.
The credit is awarded on a weekly basis, so for each week during which you are helping out, one week of credits is awarded.
In theory, this could mean that the grandparent ended up with gaps for a few weeks over the course of a year, but those gaps could then be filled very cheaply with voluntary NI contributions just for the missing weeks.
Child benefit and the state pension
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Have you lost state pension by not signing up because you don’t qualify, or putting the ‘wrong’ partner’s name down?
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In some families there will be more than one family member helping to look after the children.
In this case the parent who is getting the child benefit has to choose who benefits from the National Insurance credit.
Unfortunately, because there is only one credit for each family (rather than one credit per child), only one other family member can benefit when the credit is transferred.
To pick up on your other questions, the credit can be signed over as soon as the parent starts receiving child benefit.
Furthermore, it is however possible to backdate claims if you have been looking after grandchildren for someone who has been receiving child benefit for a number of years.
As the scheme was introduced in 2011, this may be why you recall hearing something about going back eight years or so.
Although the rules may seem quite complex, the basic idea is relatively simple.
It means that grandparents (or other family members) who may be spending time looking after young children do not damage their own National Insurance record as a result.
The numbers taking up the credit are gradually rising but, as you say, it deserves to be more widely known.
Full details of how to claim can be found here.
Ask Steve Webb a pension question
Former Pensions Minister Steve Webb is This Is Money’s Agony Uncle.
He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.
Steve left the Department of Work and Pensions after the May 2015 election. He is now a partner at actuary and consulting firm Lane Clark & Peacock.
If you would like to ask Steve a question about pensions, please email him at email@example.com.
Steve will do his best to reply to your message in a forthcoming column, but he won’t be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
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If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a Government-backed organisation which gives free help to the public. TPAS can be found here and its number is 0800 011 3797.
Steve receives many questions about state pension forecasts and COPE – the Contracted Out Pension Equivalent. If you are writing to Steve on this topic, he responds to a typical reader question here. It includes links to Steve’s several earlier columns about state pension forecasts and contracting out, which might be helpful.