Given the paltry size of benefits available to retirees under current State Pension rules, it’s critical that you are aware of all the perks that you can claim. And one little-known government scheme that can significantly improve pensioners’s income pertains to those who have grandchildren.
According to Royal London: “A family member who is looking after a child under 12 while the child’s parents are out at work can benefit from a National Insurance [NI] credit. The parent (who has gone back to work) is likely to be paying NI in their own right and so no longer needs the NI credit that comes with receipt of child benefit.”
The insurer notes that this credit can be signed over to a family member looking after the child, like a grandparent for example, if the recipient is still below the State Pension age. These steps can help them to reach the full retirement allowance, and will not result in any unwanted cost to the parent.
A £5,000 cash boost!
According to recent data given to Royal London under a Freedom of Information Request, just 10,084 grandparents claimed for this allowance in the 2017/18 tax year. But as the insurance giant points out: “This is still thought to be a small fraction of all the people who could benefit.”
And we’re not talking about a few lost pennies either. As Royal London points out: “These credits can be of considerable value to someone who would not otherwise build up a full State Pension.”
Under current rules the maximum amount that pensioners can claim stands at £8,767.20 per year. Divide this by 35 — i.e. the number of years of NI contributions required to receive the full rate — and you end up with a figure of £250.49.
“This means that someone who claims these credits for a year could get an extra £250 on their pension, or around £5,000 in total over the course of a typical twenty year retirement,” says Royal London.
Some Foolish advice
An extra £250 in your pocket is not something to be sniffed at, but that extra bit of cash each year isn’t going to be the difference between living on the breadline and enjoying a life of luxury. In order to do that you need to take a proactive approach to safeguarding your financial future, and more specifically how to build up your savings and put them to work for you.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.