Mike Wagner has a busy but enjoyable few weeks ahead of him as he will be looking after three of his granddaughters for three days a week during their summer school holidays.
“I take them to parks and playgrounds because their parents are working,” says the married grandfather of five, from Clayton in Surrey.
When Mike started looking after his grandchildren shortly after his first was born nine years ago, he did it to help his daughter and son-in-law and to spend more time with his new relatives. He never imagined it would also boost his state pension income by almost £20,000.
Mike, now 70, took early retirement from his job as a project manager in the Civil Service in 2015, at the age of 60.
He soon discovered that when he turned 65 and became eligible to claim his state pension, he would not have enough years of National Insurance contributions to qualify for a full payout.
He was four years short of contributions to receive the new maximum state pension, which requires paying 35 years of National Insurance to get the full payment of £221.20 a week. This would leave him with a shortfall of about £25 a week, or £1,300 a year due to gaps in his record.
Mike Wagner found out he was eligible to claim specific adult child care credits, also known as the grandparent credit, for caring for his grandchildren (file image)
After searching the Internet for ways to make up for the missing years, Mike discovered that the answer was right under his nose.
She was eligible to claim specific adult child care credits — also known as the grandparent credit — for caring for her grandchildren.
These loans can be requested by family members who care for a child under 12 years of age, provided that their help allows the parent to continue working. The parent must also receive child benefit and pay Social Security.
Parents earning up to £60,000 a year are entitled to the full child benefit, which equates to up to £1,331 a year for the first child and up to £881 a year for each additional child.
After this threshold, the benefit decreases and parents lose it entirely if they earn more than £80,000.
If one parent earns more than this threshold, they will still receive National Insurance credits which count towards their State Pension entitlement when they claim.
However, they will have to pay back any child benefit money they receive by filing a self-assessment tax return.
The care provided by grandparents does not have to be full-time, but could include, for example, picking up children from school or taking them on outings during school holidays. Anyone who is eligible and has gaps in their National Insurance record can claim these credits to help them qualify for the new full state pension.
Each year of credits is equivalent to one year of National Insurance contributions, or one-35th of the full state pension. At current exchange rates, this equates to £6.32 a week, £328.64 a year or £6,572.80 over a 20-year pension.
Mike was able to claim back three years of missing contributions, adding an extra £18.96 per week, or £986 per year, to the state pension amount he would receive.
Over 20 years of retirement, this would be worth around £19,718.
Mike was able to claim back three years of state pension contributions he had not paid for caring for his young family, adding an extra £18.96 a week, or £986 a year, to the amount he would receive (file image)
“The credits were a blessing because I was able to claim them for spending time with my grandchildren, something I would have been doing anyway,” she says.
‘Filling out the forms was very easy and within a couple of weeks I received a letter confirming that I qualified to receive the payments.’
Although the credit can significantly boost recipients’ state pension payments, only 22,701 people claimed it last year, according to HM Revenue and Customs data obtained by wealth manager Quilter.
Former pensions minister Sir Steve Webb, of consultancy Lane Clark and Peacock, estimates there could be tens of thousands of grandparents and family members left out.
“Due to the high cost of childcare or lack of adequate facilities, many working parents rely on help from grandparents or other family members. Working-age grandparents can claim these valuable National Insurance credits to ensure their own state pension record is protected, and I encourage them to do so,” she says.
Former investment banker Joseph Denham*, 63, decided to take early retirement in 2020 when his first grandchildren were born and now looks after his two three-year-old granddaughters two days a week.
The married father of three from Harrow, Greater London, said: “I made no National Insurance contributions for seven years, which left me with a gap in my record and unable to get the full state pension. Then a friend told me that because I looked after the children I could claim those credits.”
Joseph was originally due to receive £153.79 in state pension each week, but if he continues to claim the credits until he retires, he could be entitled to £174.95 a week.
By claiming the credits, Joseph would see his state pension increased by £1,100 a year, or £22,006 over a 20-year retirement.
“My wife and I started providing child care services so our daughter and son could go back to work,” Joseph says. “We love taking our granddaughters to the zoo, toddler groups, and the park. These are things we would do anyway, but once we found out we could claim credits for them, we didn’t think twice.”
Miles Wickham*, 63, will enjoy a welcome increase in his state pension, which he says will help him meet everyday expenses and bills.
She was able to increase her state pension by £328.64 a year after claiming childcare credits about two years ago.
The married grandfather of one retired at 57 after working for more than 30 years in a bank and now looks after his granddaughters for 20 hours a week so that his daughter can work as a health professional.
For the funds to appear, the child’s father will need to sign a document from HMRC to confirm that you cared for his child and are willing to transfer the National Insurance credits you receive for claiming child benefit to them.
Miles, who lives in south London, also hopes to apply for the pension this year and next, meaning he could see his state pension boosted by another £657.28 a year when he becomes eligible for the state pension in 2027.
Once the credits are approved, Miles could see the value of his state pension increased by £985.92 a year, or £19,718 over 20 years of retirement.
Rebecca O’Connor, director of pensions firm PensionBee, said: “To claim the benefit, parents receiving the benefit must be registered for child benefit, even if they don’t claim it. The National Insurance credits are effectively transferred from the working parent who doesn’t need them, because they’re working, to the individual who does.”
To claim specific adult childcare credits towards a state pension entitlement, you must complete an online form and post it to HMRC.
The child’s father will also need to sign the document to confirm that you cared for his child and that you are willing to transfer to him the National Insurance credits you receive for claiming child benefit.
There is no minimum number of hours you must care for a child to qualify, but you must be under state pension age, which is currently 66.
You will only receive one credit per household, so if you care for multiple children living in the same household, you will only be able to claim it once.
Claims can be backdated to 6 April 2011. You cannot claim for the 2023/24 tax year until after 31 October.
For more information, visit gov.uk/guidance/apply-for-specified-adult-childcare-credits.
a.cooke@dailymail.co.uk
*Names have been changed.
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