The Cost of Childcare; Grandparent Carers

A recent OECD report reported that the cost of childcare in the UK ranks as one of the highest in the developed world. Similar studies have examined how the pressures of dealing with childcare have reached the stage where it could affect the demographics of the UK. Families in certain parts of the country, who are knowledgeable of the cost of childcare, say it is influencing their decision on whether to grow their family unit

We are addressing the rise of cost of childcare in a series of articles. In this edition, we cover the rising importance of grandparent childcare provision, the pros and cons and any government benefits which can be claimed by grandparent carers.

The spiralling cost of private childcare means that more and more parents are turning to their grandparents when they have to return to work. Often this is out of financial necessity whereas others prefer to leave their children with a known family member rather than with a qualified (albeit unknown) childcare provider.

The benefit this unpaid work generates for the wider economy in enabling parents to return to the workplace should be recognised. The UK has been criticised for lagging behind other European countries for failing to acknowledge the importance of grandparent-led childcare.

A recent poll which focussed on working mothers suggested that 25% would need to give up work if they didn’t have grandparents available to assist their childcare cover. With 4.6 million working mothers in the UK, that could mean over 1 million women leaving the labour market with a corresponding hit to the Treasury’s coffers.

The report also highlighted the importance of on-call grandparent cover for school holidays and other common scenarios where either parent were unable to care for their children.

A report by insurance company Ageas estimated that grandparents provide childcare worth £1,786 for their loved ones per annum, equating to £16.1bn across the United Kingdom.

In other countries, there are measures which recognise and support this new reality of working grandparents supporting their children who want (or more likely need) to get back to work. This includes the ability to transfer statutory parental leave to working grandparents or formal provision for working grandparents to take time off if their grandchild is sick.

The only benefit currently offered in the UK is the ability for grandparent-carers to claim for National Insurance credits which help them target the maximum state pension level.

To qualify for a full state pension retirees need to have built up 35 years’ worth of National Insurance Contributions (NICs). Many baby-boomer parents (traditionally mothers) gave up work early to care for their own children so often don’t reach the required level of contributions.

Under rules introduced in April 2011, parents returning to work can complete a form which means the grandparent-carers receive NICs in exchange for their childcare (for family members under the age of 12). These credits can be backdated to April 2011 and the Government is encouraging eligible grandparents to apply but it is still a relatively unknown benefit. More than 19,000 grandparents have made use of the benefit but it is estimated 100,000 in total qualify.

As with most benefits, it is not automatically awarded but it is important to claim what is the only benefit or concession offered to grandparent-carers in the UK currently.

For most parents with a long-term view of their finances, the decision to return to work is out of their hands – they have to. However, for new parents who are lucky enough to have willing grandparents who live locally, the choice between cheaper, grandparent-led care and local, dedicated childcare providers is still not simple.

For grandparent-led care, the boundaries and logistics of the care can in some cases lead to family friction. In the worse cases, the joy of grandparenting quickly becomes a worrisome chore and disagreements can escalate within the family. Subjects of friction can include diet, behavioural boundaries and punishments, agreed screen time and safe activities. When making the choice of childcare provision it is important to consider all of this in advance.

Indeed, most grandparents are happy to provide childcare without reward or complaint but honest discussions are needed in advance regarding their long-term ability to be able to cope with the rigours of this care, particularly as the family unit grows and gets older. Rising retirement ages are another factor which are putting a squeeze on the energy of grandparents. Many are desperate to help their children with childcare (and see more of their grandchildren) but are having to work to an old age due to pension pressures, often with no concession from their employers (as mentioned above).

The financial and emotional benefits are clear for grandparent-led care but ground rules at the start of the arrangement can help avoid familial-strife and ensure the arrangements do not descend into an emotional burden. Each family unit is unique with different personalities and dynamics and careful consideration needs to be made to whether the burden of grandparent-led childcare care will create more problems than it is worth.

In addition, there are numerous studies which highlight the benefits to the child of structured nursery childcare, particularly in relation to cognitive development and easing the transition from nursery to school. These reported benefits however, can be easy to overlook when your large nursery-fee direct debit leaves your account every month.

Provided for informational purposes only. Not designed as advice. Speak to your IFA or tax advisor for advice tailored to your individual circumstances.
Information correct at the time of publishing.