Auntie or uncle? You could claim an extra £3,600 on your state pension – every year

Sir Steve Webb was pensions minister for five years in David Cameron’s government and spent much of his working life understanding, and reforming, Britain’s complex pension system. He is a partner at consultants LCP

For more than 40 years, the state pension system has included measures to protect the National Insurance (NI) record of parents who are not able to pay contributions because they are out of paid work while looking after their children.  

But what is less well known is that since 2011 there has been similar protection for grandparents, aunts and uncles and other family members who have helped to care for those same children.  

And the great news is that even if many years have now passed since you had those responsibilities, you can still put in a claim today all the way back to when the system first started.

The starting point for all of this is the fact that when a parent claims child benefit it comes with a valuable added feature – a “National Insurance Credit” which goes on the parent’s NI record. 

Since 2010 this credit has been awarded automatically for any full financial year in which you claimed child benefit for a child under 12. It is awarded whether the parent is at work or not.

Where the parent who claims the child benefit (typically the mother) is also going out to work then she is likely to be paying NI contributions and building up a year towards her state pension through that route. This means that the NI credit which comes with the child benefit is going “spare”.

This spare NI credit can be transferred to someone else in the family who is helping to look after the child, provided that they themselves are under state pension age for the full year.  

Note, however, that the credit can only be transferred to one family member, even if more than one has been involved in looking after the child.

Who can claim?

• a mother or father who does not live with the child
• a grandparent, great-grandparent or great-great-grandparent
• a brother, sister, half-brother, half-sister, step-brother, step-sister
• aunt or uncle
• You can also be eligible if you are either the current or previous husband, wife, partner or civil partner of anyone in the list. Or the son or daughter of the current or previous husband, wife, partner or civil partner of anyone in the list

How do you claim the ‘spare’ NI credit?

1. Gather together the vital information: the full name, date of birth, address and NI number for the parent or main carer of the child.

2. The person looking after the child fills in an application form (you can find it here) and confirms that they have indeed looked after the child in question.

3. The parent also signs the form to say that they are happy for the NI credit which comes with their child benefit to be transferred to the other family member.   

4. Print the completed form (with signatures) and send to HMRC at the address provided online.

One thing which makes all of this easier is that there is no minimum number of hours of care required, and no additional documentary evidence is required. 

Provided that the grandparent (or other family member) is happy to sign the form to confirm that they helped look after the child and that the child’s parent is willing to sign the form as well, then that’s all that is needed.  

In fact, so keen is the Government to encourage people to take up this credit, that during the Covid lockdowns it was possible to claim even when the caring was done remotely – perhaps keeping a child amused over a video call while the parent was trying to get some work done.

The value of these credits can be very significant.

How much can you get?

Consider for example the case of a grandparent who has taken early retirement to look after the grandchildren while their mother goes out to work.  And let’s assume that, as a result of taking early retirement, the grandparent is short of the number of years that they need for a full state pension.

If the grandparent looks after the child for one year, they can get an extra year towards their state pension. In many cases this will be worth 1/35 of the full pension rate.  At current rates – the full state pension is £203.85 a week – this will add just over £300 per year to their pension when it is drawn. 

In an extreme case of someone who claims for every year from the 2011-12 tax year to 2022-23 inclusive, this could be an extra 12 years of credits and an extra £3,600 or so on their state pension – every year.

Grandparents are sometimes concerned that by claiming this credit they may in some way be harming the state pension position of the child’s mother, but this is not the case. 

The reason that the NI credit is “going spare” is that the mother is herself out at work, or is paying NI contributions and building up a state pension record. This means that signing over the credit cannot have an adverse impact on her NI record.

The ‘high income’ trap

One problem which can arise is where the child’s parents have decided not to claim child benefit at all because of the impact of the “high income child benefit charge”. 

This might happen where, for example, a couple has one earner on £60,000 per year or more and they have decided it is not worth one partner claiming the child benefit only for the other to get a tax bill of equal magnitude.

The solution to this problem is for the mother simply to claim the NI credits, but not the child benefit cash. As long as she has done this – and there’s a tick box on the child benefit form that specifically allows you to make this choice – then that NI credit is potentially free to be transferred to another family member.

Unfortunately, it’s currently only possible to backdate this process for three months if the parents didn’t claim at all.

The official name for these credits is a “specified adult childcare credit”, simply because you have to “specify” which adult it is that has looked after your child. You can find more information on how to claim on the gov.uk website here.

HMRC only accepts applications from October 31 after the financial year in question (so you can now put in a claim for 2022-23).  

This is because it is only by this point that the parent’s NI record for the year should be finalised and it will then be clear that they already have a year towards their state pension (through paid work), and that the NI credit is now spare.

Because of the high level of interest in these credits, HMRC can take many months to process an application, but it is worth the wait. Eventually this should result in an improved NI record and a higher state pension at no cost to yourself or any other family member.

Have you successfully claimed extra state pension for looking after children? We want to hear from you, email: money@telegraph.co.uk