Yahoo Finance Women face £183k pension penalty due to childcare and part-time work
Mothers face a pension penalty of up to £183,000 as parenthood means juggling their career or putting it on hold, according to research from Royal London.
Women are still far more likely to stop or reduce their working hours for childcare after becoming a parent. According to data from the Office for National Statistics (ONS), the most common arrangement among families in the UK is for the father to work full-time, while the mother works part-time, until the youngest child in the family is 11.
Mums can miss out on pension savings of nearly £92,000 by juggling childcare and working part-time until their child reaches secondary school. And the consequence of leaving work altogether for the same period can create a £183,000 hole in pension savings.
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“Altering working patterns after having children most often falls to the female, but comes with a sting in the tail. Women not in paid work because they are bringing up children can miss out on building up a full state pension and be tens of thousands of pounds worse off in their personal pension,” Clare Moffat, pensions expert at Royal London, said.
A shortfall in pension savings alongside reduced, or missed, national insurance contributions creates a double whammy, meaning women could face a reduced amount of state pension they are entitled to without the full 35 years of NI contributions or credits.
More than nine in 10 (92.1%) fathers with dependent children work compared to three in four mothers (75.6%), with over twice as many — nearly 3.6 million — female part-time workers than men.
“Reducing hours or stopping work altogether to care for children means pension saving takes a hit and it might also mean that they don’t have the 35 years of national insurance contributions or credits needed for the full State Pension,” Moffat warned.
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“The number of decisions you’re faced with when you become a parent can be overwhelming, but shouldn’t just involve the length of maternity leave or dealing with childcare costs. Talking to your partner about money and thinking about how your financial planning decisions impact you as a couple, both now and in the future, is vital. That way you look at all options available to both people in a relationship,” she added.
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