By Chris Fairhurst, associate solicitor in the family law team
This first appeared in the Wigan Observer on September 7th 2014
Q: My daughter is constantly struggling with money and childcare for my grandchildren, how can I help to support them?
A: With ever increasing pressure on all families, as daily life seems to get quicker and there is less time available to balance children, work and home life, more and more families are turning to their grandparents for childcare as a generation of “silver carers” take an increasing role in the day to day life of their own children’s children.
For many parents, whether they be single parents, or families where both parents are trying to juggle family responsibilities with a job, grandparents still seem to be the first choice for childcare as they are naturally more trusted than might be the case if the difficult decision has to be made to obtain professional childcare.
One in four grandparents are said to provide frequent care for children, ranging from day to day care to helping in an emergency. Although most grandparents who provide care are retired or not working, a large amount are still working.
A recent study of over 700 grandparents commissioned by Interflora in time for “Grandparents Day” on 5th October (Were you even aware of that such a day existed?) found that 27% of grandparents provide childcare for their own grandchildren while whilst their parents are working, and nearly a quarter of all working parents with school age children admitted they wouldn’t be able to work if their own parents were unable to provide the childcare for them. The study also emphasises the importance of the bond between grandparents and their grandchildren, which can provide greater stability within a family, even in very difficult times, and probably more so if the family has experienced separation.
As the retirement age has continued to rise over the past couple of decades, and health and life expectancy has improved, the evidence suggests more grandparents are also choosing to support their family with childcare, whilst holding down their own job as well. A large proportion of grandparents have had their working hours cut, given up a job or taken annual or sick leave to provide childcare for their grandchildren at some point.
However, very few grandparents know that they may be able to boost their own state pension while providing childcare. To be able to claim national insurance credit, grandparents need to fit four criteria:
1) The child cared for needs to be under the age of 12
2) The parent has to have a full national insurance record for the whole tax year
3) The grandparent has to have provided some form of childcare every week for the entire tax year
4) The grandparent claiming the benefit has to be under the state pension age for the whole tax year.
The rational for this is that a non-working parent getting child benefit for a child under 12 is entitled to National Insurance credits. If working, the credits can be passed to a relative who helps look after the child.
Grandparents stand to be able to provide greater financial support to their families with the recent announcement of plans to cut inheritance taxes on pensions. New rules, announced by Government last week and being brought into force in April next year, will cut inheritance tax so that those inheriting the person savings will be charged at their normal income tax rate as opposed to the higher rates charged now.
Also, before the reforms announced last week, only spouses or dependent children under the age of 23 were able to inherit a pension free of charge. However these new rules will allow anyone who inherits a pension, from a saver under 75 years old, to inherit the money free from inheritance tax. Although it’s worth mentioning that savers who have bought annuity (paying for a guaranteed income for the rest of their life) won’t be able to pass this on to their family after they die. This is because the providers of annuity keep any remaining funds after a saver dies.
This recent announcement is said to be the “final step” in the reformation of the pension system and that the changes to be put in place will allow savers to have more control over their pensions. The new system will allow savers the opportunity to access their pension from over the age of 55, the choice to invest their money while withdrawing regular instalments to live off and to pass down their pension without the large inheritance tax.
Regardless of the financial situation it is clear that more than ever a large number of Grandparents are continuing to provide invaluable support to working families on a regular basis. Not only does “Bank of Grandma and Granddad” help support hard pressed families financially; they provide emotional support which money can’t buy.