Thousands of state pensioners could be missing out on extra retirement income through an often-overlooked HMRC scheme designed to reward grandparents and relatives who help care for young children.

Under Specified Adult Childcare (SAC) credits, grandparents and other family members who regularly look after children under the age of 12 may be able to boost their State Pension entitlement by receiving additional National Insurance credits.

The scheme works by allowing National Insurance credits connected to Child Benefit claims to be transferred from the parent or guardian claiming the benefit to a relative who provides childcare. This can help fill gaps in National Insurance records and potentially increase future pension payments.

Experts suggest the extra support could add up significantly over retirement, with some eligible pensioners potentially gaining thousands of pounds across their retirement years. In some cases, qualifying credits could increase annual pension income by around £300 depending on individual contribution records.

To qualify, childcare must usually be provided for a child under 12, or under 17 if the child has a disability. The arrangement can apply during school holidays, term time or regular childcare support provided by grandparents or other relatives.

Those approved under the scheme receive Class 3 National Insurance credits for every full or partial week they provide care. However, only one transferable credit can be assigned per Child Benefit claim, regardless of the number of children covered.