Looking after grandchildren during the summer can increase your state pension

Providing regular childcare to under-12s can boost your state pension, but two-thirds of those over 50 aren’t aware of the option, new research shows.

A single additional National Insurance credit adds £303 a year to a full state pension at the current rate, which works out to more than £6,000 over a normal 20-year retirement.

You can also declare ‘grandparent loans’ retroactively from 2011.

This is particularly useful if you fall short of the minimum 10 years required to claim a state pension, or under 35 years required to get the full rate – now £203.85 per week or about £ 10,600 a year.

The increase is only available for children whose parents worked and therefore do not need the credits from applying for child benefit for their own state pension.

‘Working parents who struggle to find affordable childcare often turn to grandparents to look after their offspring, especially during the long school holidays,’ says Clare Moffat, pensions expert at Royal London.

“Thousands of grandparents don’t claim it, often because they simply don’t know they can.

“While an incomplete NI record affects both women and men, more women are likely to have stopped working to care for children, elderly relatives or for health reasons, and are underemployed.”

Royal London found that 59 percent of those over 50 didn’t know credits could be applied for helping with childcare, and 29 percent didn’t know you need 35 qualifying years on your NI record to get a full state pension.

The findings come from a nationally representative survey of 4,000 people conducted in June.

Separate research found that grandparents spend 264 hours, the equivalent of 11 full days, caring for grandchildren during the summer holidays.

“The cost-of-living crisis and the phenomenal rise in childcare costs have pushed grandparents to the forefront,” says Moffat.

‘For most people, the AOW forms the basis of their retirement income and it can make a big difference if you have a shortfall. It is therefore very important to check your file and claim what you are entitled to.’

> Check your National Insurance Registry and your AOW forecast

How do you claim ‘grandparent credit’

More formally known as ‘specified childcare allowance for adults’ you can apply for this from 1 October of the year following the assessment year for which you want to file a tax return.

A parent must have applied for child benefit, although this is not necessary to receive the payments as they can make a ‘credits only’ claim if a partner earns more than £50,000.

However, the parent may not need their own state pension credits, which is common because many go back to work and thus still pay premiums for their state insurance.

Former Pensions Secretary Steve Webb, now a partner at LCP, gave an overview of grandparent loan rules in a column for This is Money.

He says the most important things to remember are:

– There is no minimum hours requirement and as long as the child’s parent confirms that the care was provided by another family member, that person can benefit

– These are National Insurance premiums for future state pension entitlements, so they only apply to those who are currently below retirement age

– Transferring the NI credit costs nothing for the parent who goes to work and pays his own NI contributions – this NI credit will be ‘saved’

– Provided the parent is applying for child support, or even claiming only the NI credits – not the payments if they earn more than the eligibility limit – the credits can be transferred

– While the child’s caregiver will often be a grandparent, other family members such as uncles and aunts can also apply.