I’ve lost £800 a year state pension because of child benefit loophole – how you can avoid it
A GRANDMOTHER has lost £800 a year in state pension payments because of a loophole that could leave other grandparents missing out too.
Judy Lynch, 66, spent three years caring for her grandchildren after retiring from teaching.
When she started claiming her state pension this year, she found she was short of the 35 years needed to get the maximum amount.
But she realised the years looking after the kids could count towards her pension by applying for "specified adult childcare credits".
These credits are designed to add to your national insurance record and can be claimed by grandparents under state pension age looking after children under 12.
Millions of caregivers are already thought to be missing out on the little-known perk which can top up state pensions.
Ms Lynch says that the three years of childcare credits would add an extra £800.49 to her state pension payments every year.
But after applying she found out she was not able to get the credits and extra cash because of a confusing loophole in the rules.
Her daughter was not registered for child benefit because she earned too much to get it, meaning that Ms Lynch can't access the credits.
The former head teacher told The Times: “At such a busy time in someone’s life, just after you’ve had a baby, why would you waste time filling in a form to claim something you knew you could not get? Few would even bother to look at the form,” Lynch said.
Anyone earning over £50,000 can't get child benefit, but parents are still encouraged to register so they don't miss out on these national insurance credits.
The credits act as a plug for any gaps in National Insurance Contributions when taking time out of work to care for children.
The problem is, that rules introduced in January 2013 say that if parents don't claim child benefit, they won't get these vital NICs.
These credits can essentially be passed on to another family member who is doing childcare, like Ms Lynch.
But the parent must be registered for it in the first place, even if they are not eligible for child benefit.
Experts have previously warned that the confusing system doesn't make the impact of not claiming child benefit clear enough.
Ms Lynch's daughter has now registered for child benefit, but HMRC will only backdate the credits for three months.
This gives her zero pensions boost as you need a full year of credits.
Steve Webb, a former pensions minister and now partner at LCP, told the newspaper: “National insurance credits can be vital to parents and grandparents in protecting their state pension rights when looking after children.
"Where it becomes apparent that a parent has missed out, they should be able to backdate their entitlement. There is no reason for the draconian three-month time limit on backdating of credits.”
HMRC said that it gives people the option to opt out of receiving child benefit payments, while continuing to receive national insurance credits.
How can I apply for credits to look after grandchildren?
You can apply for specified adult childcare credits if:
- You are a grandparent, or other family member caring for a child under 12
- You were over 16, and under state pension age when you cared for the child
- You live in England, Scotland, Wales and Northern Ireland, but not the Channel Islands or the Isle of Man
- The child’s parent (or main carer) is entitled to child benefit and has a qualifying year for national insurance without needing the parent’s class 3 national insurance credits which they receive automatically from child benefit – they can check their national insurance record online to see if they have any gaps in contributions
- The child’s parent (or main carer) agrees to your application by countersigning the form to confirm that you cared for their child for the period stated and you can have their class 3 national insurance credit for the period stated
To claim Specified Adult Childcare credits you will need to complete an online application form.
You need to provide your personal details, as well as information about the child and the periods of care you provided.
As part of the application process you also need to input the personal details of the child's parent or the Child Benefit recipient.
Finally, both the applicant and the parent must both sign the form.
Specified adult childcare credits can be awarded retrospectively to 6 April 2011 at the earliest.
You must have been under the state pension age when you cared for the child for all the years you claim.
But you can only get the credits backdated if the parent is registered for child benefit.
How to make sure you get National Insurance credits
Make sure one parent is claiming child benefit, even if one or both earns more than £50,000.
They can choose not to get child benefit payments, but should still fill in the claim form.
This will make sure they get National Insurance credits, which count towards your state pension, or can sign them over to a grandparent or other family member.
Claiming child benefit also means the child will get their National Insurance number automatically shortly before they’re 16. They won’t have to apply for one themselves.
Parents don’t have to take the child benefit cash and then pay it back as tax. Instead they can tick a box on the application for a "zero rate" of child benefit.
How can national insurance credits boost my state pension?
National Insurance credits are a way of maintaining your National Insurance record.
They help to build up qualifying years over time, which you can use to make you eligible for the state pension.
You need 35 years of National Insurance contributions, or credits if you're not working, to secure a full state pension.
You will need at least 10 qualifying years to get any state pension at all.
You can check your national insurance record online here at gov.uk.
There may be gaps if you were unemployed, lived abroad or took time off to care for children or relatives, which means you could get a lower amount.
But in some cases you can apply for credits to top up your retirement fund.
It is also possible to make voluntary national insurance contributions to top up your record, usually from the previous six years.
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