Are grandparents getting the credit they deserve?

Published  19 June 2024
   5 min read

Working parents struggling to find affordable childcare often turn to grandparents for help.

Many grandparents enjoy this time with their grandchildren, and it can keep them mentally and physically fit. But could it mean a worse retirement?  

When we reach our 50s or early 60s, life can become a bit easier financially. By this age you might’ve paid off your mortgage, built up your savings or be paying more into your pension in preparation for retirement.   

But often grandparents reduce their working hours or stop work completely to help care for their grandchildren. This applies particularly to women - our gender wealth and pensions research1 found that 14% of women retired early to care for relatives compared to 5% of men. If this is something you’re considering doing it’s worth remembering this can not only affect the amount being paid into your workplace pension, your State Pension can also take a hit too.  

What’s the issue? 

You can start claiming your State Pension at your State Pension age. This is currently age 66 but it’s set to continue increasing. More information on your State Pension age and State Pension in general can be found in our 'What is the State Pension and how does it work' guide.  

You need a minimum of 35 years of National Insurance contributions or credits to receive the full amount of State Pension, currently £221.20 a week. You might need more than 35 years of contributions if you were in a workplace pension where you were “contracted out”.  This means that you paid less National Insurance, and your workplace scheme effectively pays some of your State Pension so you will receive less actual State Pension. If you were contracted out your State Pension forecast will have the letters COPE (contracted out pension equivalent) on it.   

The State Pension is the foundation of most people’s retirement. Through our State Pension research, we found that for nearly a third of women it was in fact their only income in retirement. So, it’s important to make sure if you, or a family member, are caring for grandchildren that you’re going to receive as much State Pension as possible.  

Our State Pension research also found that two thirds of those surveyed didn’t realise they could claim National Insurance credits for caring for grandchildren. This can be extremely useful for anyone with gaps in their National Insurance record. 
If you miss a year of National Insurance contributions and don't make it up, you'll lose 1/35th of the full amount of State Pension. That's currently equivalent to £329.77 a year. So, it’s important to check your National Insurance record. And claiming National Insurance credits for looking after grandchildren could help you to receive more State Pension.  

What can you do?

Grandparents (or other relatives) under State Pension age who look after their grandchildren on a regular basis can apply for these credits, which are called Specified Adult Childcare Credits. A woman claiming these credits for one year could then receive £6,925 of extra State Pension over the rest of her life. This is based on average life expectancy for a woman of 87 who starts claiming her pension from age 66. To receive these credits, grandparents need fill out this online form. Working parents are required to give up the credits they could receive and donate them to the grandparents. That’s because working parents don’t need National Insurance credits as they’re making National Insurance contributions. These credits can be backdated until 6 April 2011.  

Making sure you have the maximum State Pension in retirement is important for everyone but even more so for women who’ve taken time out of the workplace to care for children earlier in life as well. Claiming these credits is an easy way to make sure you can receive as much State Pension as possible, as well as enjoying time with grandchildren and supporting adult children.