Grandparents who help out with childcare and so enable their daughters to go back to work are almost certainly missing out on hundreds of pounds a year in state pension rights, a freedom of information (FOI) request by Royal London has revealed.
Under current rules, if a mother goes back to work after the birth of a child, she can sign a form that allows a grandparent – or other family member – to receive National Insurance (NI) credits for looking after the child. A grandparent who gives up work to look after the grandchild would otherwise be losing out on valuable state pension rights.
Royal London head of policy Steve Webb (pictured) explained: “If a working-age grandparent misses out on one year of state pension rights because they are spending time with a grandchild instead of doing paid work, this would cost them 1/35th of the full rate of the state pension – or £231 per year. Over a 20-year retirement, this would be a loss of more than £4,500.”
However, the FOI reply Royal London received from HMRC showed this system – known officially as the ‘Specified Adult Childcare Credit’ – is so little known just 1 ,298 grandparents and other family members benefitted in the year to September 2016. This is roughly a quarter fewer than two years earlier, when 1,725 benefitted.
“Hardly anyone is claiming the credit,” said Webb, pointing out the 1,298 figure equates to some two grandparents per Parliamentary constituency. “There could easily be 100,000 working-age grandparents who should be benefitting.
“Given HMRC knows which mums are not using their NI credits because they are working and paying NI, it wouldn”t be hard to alert them to the fact they could pass the credit on to the grandparents.”
‘Alert Mothers’Royal London has therefore called on the government to alert mothers to the fact they can sign over the NI credits they do not need. Webb said: “Schemes like this are introduced with the best of intentions but simply do not target well enough those who could benefit.
“As government advertising budgets are understandably more limited, I would suggest a targeted mailing campaign. As HMRC writes to mothers to update them on NI credits every year, they could include an explanation of the scheme to raise awareness.”
Grandparents Plus chief executive Dr Lucy Peake said: “Grandparents play a crucial role in caring for millions of children up and down the country and are a lifeline to families squeezed by falling incomes and rising childcare costs.
“When they give up their own jobs to help out, they shouldn’t damage their future state pension in the process, and the system for making sure grandparents are protected in this situation needs to be much better publicised.”