Grandparents could be missing out on thousands more pounds in their state pension when they retire because they aren’t aware of a little-known rule.

Grandparents, and other family, who care for children for free could claim National Insurance credits that will help to boost their state pension entitlement. They must be before state pension age and meet certain other criteria to be able to claim. Here’s how it works.

WHO IS ELIGIBLE?

If you’re not yet at state pension age and you look after a child under the age of 12 you could claim the benefit. Your children will also need to be claiming child benefit and not need the NI credits themselves.

You’ll need to first check your National Insurance record and see whether you have any missing years. Each year that you’ve been entitled to NI credits or worked and paid NI will be counted as a ‘qualifying year’. Any years where you didn’t work or claim credits will be missing on your record.

Many grandparents will have given up work to help look after their grandchildren, meaning they wouldn’t be paying NI through their employment. These gaps in your record mean you might not have enough qualifying years to be entitled to the full state pension. You need to have 35 ‘qualifying years’ of national insurance credits to get the new state pension. You also need to have an NI record of at least 10 years to qualify for any state pension.

CHECK YOUR CHILD IS ENTITLED TO CHILD BENEFIT

The next step is check whether the parents of the child you care for are claiming child benefit. The number of parents claiming this has dropped to its lowest levels on records as more people are unaware they can claim it or are not eligible for the payments.

Once a parent earns £50,000 they start to lose child benefit and once they hit £60,000 they lose all entitlement to the payment. However, even parents in this situation can claim child benefit and not get the payment, meaning they are still entitled to the National Insurance credit. Many people who hit £60,000 of earnings will not claim child benefit, if they don’t need the NI credits. But they’ll need to start claiming it for the grandparent (or other family member to benefit).

TRANSFER THE CREDITS

Once you have checked you meet the criteria above, you can then fill out a form to transfer those NI credits to yourself and boost your NI record – unfortunately it won’t happen automatically. You need to apply for Specified Adult Childcare Credits.

You will need to fill out details of the child and their parent and then get their parent to sign it. The good news is that you can also backdate your claim to 2011. So even if you’re not caring for the children now (or you’ve hit state pension age) you can claim for any years that you were eligible and caring for the child. There is also no minimum number of hours that you have to provide childcare for in order to be entitled.

HOW MUCH IS IT WORTH?

The credits will boost your pot, but it depends on your qualifying years shortfall and how many years you can claim for. For example, if you have 30 qualifying years and can claim for five years, boosting your record to 35, you could get an extra £1,514 a year in state pension payments. Considering this costs you nothing, that’s an amazing return on your money.

BUYING NATIONAL INSURANCE CREDITS

If you’re not eligible for this benefit but still have gaps in your record you can pay to fill them.

You can usually buy NI to fill gaps in your record for the previous six tax years. However, until 31 July 2023, transitional arrangements introduced alongside reforms to the state pension in 2016 mean you can fill in gaps all the way back to April 2006.

You will usually need to pay voluntary ‘Class 3’ NI contributions to top up your state pension entitlement. In 2023/24, it costs £17.45 to buy one week’s worth of Class 3 NI, or £907.40 per year.

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