Taking time out to raise children can lead to women missing out on up to £183,000 in pension savings, according to the findings from Royal London’s latest research.
‘Tackling the gender pension and wealth gap’ reveals a clear distinction between the career paths of men and women after becoming parents. The research found women are still far more likely to stop or reduce their working hours for childcare after having children, with half of male workers stating that leaving work or going part time isn’t even a consideration. This compares to just a quarter of women who say the same.
According to the Office for National Statistics, the most common arrangement for 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.
However, the impact of women taking a step back is having a significant impact on the labour market, with 1.65 million fewer women in employment in the UK than men. It can also lead to a shortfall in pension savings for women, alongside reduced or missed National Insurance contributions which could also see women face a reduced amount of State Pension.
Royal London’s research found that even those working part-time could miss out on £92,000 in pension savings.
Mums who look after children and are not earning can get protection for their state pension record by claiming Child Benefit, which automatically provides national insurance credits until the youngest child is 12. Those families who don’t want to receive Child Benefit because one parent breaches the earnings limit can still receive national insurance credits, however, the non-working parent needs to officially ‘claim’ Child Benefit to receive credits which can cause confusion.
In addition, Royal London warned that women tend to live longer than men, meaning they face a longer retirement with less pension savings.
Clare Moffat, pensions expert at Royal London, said: “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.
“Data tells us that the majority of responsibility for raising children is carried out by women, and adversely impacts their income. Not only does the interruption to their employment pattern impact their financial security and independence in the short term, it also affects them in later life by creating a huge gap in their retirement savings.”
Moffat added: “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.”
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