Grandparents and other family members are often a massive source of help when children are born, both in terms of parental advice and also with care duties. However, what is seldom known is that this labour of love can bring with it a financial benefit.
As a firm with young families, we know how a new addition to the family brings huge joy, but also often worries about financial commitments and we want to share the opportunities that can make some real long-term financial wins. As ever, we believe in doing all of the little things consistently well to achieve the long-term positive results.
Let’s look at benefits for family members who may act as child carers when parents are back in work…
A transferable child benefit was introduced in 2011, which enables retired grandparents or an associated family member who look after a child to claim a National Insurance (NI) credit from one of the parents, thus boosting their state pension in retirement. The official name for this benefit is ‘Specified Adult Childcare Credit’.
A parent who receives Child Benefit for a child under 12 automatically gets NI credits towards their State Pension. However, a mum who goes back to work and pays NI doesn’t need the credit because she will acquire a qualifying year towards State Pension anyway through work. Under this scheme, this surplus credit can be attributed to the grandparent who is actually looking after the child. This means the grandparent benefits from the NI credit and it goes towards their State Pension instead. All that is required is for the mum to complete a form and transfer the benefit.
By applying for a NI credit, a grandparent looking after their grandchild for one year could receive an additional £230 per year to their State Pension, which would amount to £5,500 over a typical 20-year retirement (when pension increases are taken into account). Claiming one year’s worth of child care via this scheme could be the difference between making difficult financial choices throughout retirement, having greater peace of mind or a couple of extra treats!
Whist this is great news for any new claimant, the scheme also allows for a backdating of the credits too. Therefore it is definitely worth checking your eligibility if you think this is you! Someone who has looked after a child full-time prior to the child attending school aged 5 could claim all of these years’ worth of credits, adding £1,150 to their State Pension per year (£230 annual credit x 5 years of care), which would result in an estimated total retirement benefit of £27,500!!
Surprisingly, given the full potential of the benefit, it is estimated that only 1 in 10 of those who are eligible actually apply for it – so it is either seldom known about or the benefits have not been fully explained, or perhaps a combination of the two. To apply you will need to complete a CA9176 form which can be found here and you will need the below details and signatures:
- Personal details of the applicant – the family member caring for the child
- Child’s details and the periods of care
- Personal details of the child’s parent (or main carer) – the Child Benefit recipient
- Applicant and the parent must both sign their declarations on the application
A National Insurance helpline is available for those with queries:
Phone: 0300 200 3500 Textphone: 0300 200 3519
Monday to Friday, 8am to 8pm, Saturday, 8am to 4pm.
The Technical Side
What you will receive
- A Class 3 NI credit for each week or part week you cared for the child. Class 3 NI credits help to build entitlement to the State Pension and, until April 2017, certain bereavement benefits
- It can help to minimise gaps in your National Insurance record
Who is Eligible
You can apply for Specified Adult Childcare credits if:
- You are a grandparent, or other family member caring for a child under 12 years old
- You were over 16, and under State Pension age when you cared for the child
- You are ordinarily resident in the United Kingdom – meaning England, Scotland, Wales and Northern Ireland – excluding the Channel Islands or Isle of Man.
- The child’s parent (or main carer) is entitled to Child Benefit and has a qualifying year for National Insurance without needing the parent’s Class 3 NI credits, which is received automatically from Child Benefit (anyone can check their National Insurance record online to see if they have any gaps in contributions)
- The child’s parent (or main carer) agrees to your application by countersigning the form to confirm that:
- You cared for their child for the period stated
- You can have the Class 3 NI credits for the period stated
You should not apply for Specified Adult Childcare credits if you:
- Already have a qualifying year of National Insurance – usually because you work or receive other NI credits (you can check your National Insurance record online to see if you have any gaps in contributions)
- Are receiving Child Benefit for the child – you already get Parent’s credits automatically
- Are the partner of, and live with, the Child Benefit recipient and you want to transfer the Parent’s credits from your spouse or partner to yourself – you apply to do this on form CF411A
Who are Family Members?
If you look after a relative under age 12:
- mother or father who does not live with the child (‘non-resident parent’)
- grandparent, great-grandparent or great-great-grandparent
- brother or sister
- aunt or uncle
- husband or wife or former husband or wife of anyone in 1 to 4
- civil partner or former civil partner of anyone in 1 to 4
- partner or former partner of anyone in 1 to 6
- son or daughter of anyone in 5 to 7
- in respect of the son or daughter of anyone in 4, that person’s:
- husband or wife or former husband or wife
- civil partner or former civil partner, or
- partner or former partner
For 3), in relation to the child, and 4), in relation to the parent, include:
- a half-brother or half-sister
- step-brother or step-sister
- an adopted brother or an adopted sister
For 7), a partner is the other member of a couple consisting of:
- a man and woman who are not married to each other but are living together as husband and wife, or
- two people of the same sex who are not civil partners of each other but are living together as if they were civil partners