How much becoming a mother can cost you in retirement

When 46-year-old Stephanie Whitelock’s son Gabe was born with cerebral palsy and autism, she knew she would have to make some major changes to her life. Gabe, now 10 years old, uses a wheelchair and requires significant, round-the-clock support with everyday life, and Stephanie decided she would rather provide that care than hire someone else. But that meant Stephanie, who lives in Surrey with her husband James, 48, and their three children, had to give up her part-time job working in student services at a sixth-form college and is no longer paying into a pension. Shorts It comes as new calculations show that women who take five years out of work in their thirties before returning part-time (three days per week) could end up almost £244,000 worse off in retirement. The impact could rise to more than £422,000 for higher earners, according to figures calculated by investment platform interactive investor (ii). Stephanie now provides over 70 hours a week of unpaid care for Gabe while earning nothing – and she’s realised her retirement will hugely suffer because she isn’t building up any savings. She currently receives around £1,000 per month in benefits to cover her expenses for her son, but it leaves her with very little left over. “Caring means I’m not bringing in any income, and when I look at my friends, I know my retirement will look very different financially,” she said. “I’m not adding any money to a pension, and the amount I have in pensions now won’t be anywhere near enough for a comfortable retirement.” Stephanie is just one of many women who find themselves financially hard done by as a result of becoming a mother and caring for their children. Stephanie Whitelock, pictured with her son Gabe, provides over 70 hours a week of unpaid care for Gabe while earning nothing How much could women be missing out on? For an average earner aged 30 on a salary of £39,500, taking five years out and then returning on a three-day-a-week salary would result in roughly £91,312 of lost pension contributions over 35 years, according to ii data. Once the investment growth that money could have generated is taken into account, the total loss in pension wealth rises to £243,950. For a higher earner aged 30 on a £68,400 salary, the equivalent retirement shortfall could reach £422,495. The cost is smaller, although still substantial, for someone taking a career break later in life because there are fewer years for missed pension contributions to compound. An average earner aged 40 on a £41,100 salary could lose £65,483 in pension contributions. With the investment growth those contributions might otherwise have earned, they could be £133,211 worse off by retirement. The calculations assume salaries rise by 2 per cent a year. Why women can be hit harder Women are substantially less likely than men to work full-time as they get older, according to Office for National Statistics (ONS) data. Among workers aged between 22 and 29, 84 per cent of men work full-time compared with 75 per cent of women. But the difference grows sharply during the years when many people have children. Around 90 per cent of men aged 30 to 39 work full-time, compared with just 66 per cent of women. The gap continues to widen later in life. Camilla Esmund, head of investor campaigns at ii, said career breaks and part-time work tend to disproportionately impact women, who typically take more time out of work or give up work entirely to care for children. She added that the UK has some of the highest childcare costs in Europe, putting a further strain on families’ finances or encouraging women to sacrifice returning to work – and therefore their ability to save for retirement effectively. “We need to take this seriously, because as it stands, many women across the UK are at real risk of retiring with less financial security,” she said. How to boost your pension Maximise your workplace scheme or set up a personal plan If you’ve spent years out of work, you could make the most of your workplace pension by increasing your contributions – that way you will benefit from compound interest, and in some cases, your employer may match your contributions or at least increase them. It could also be worth setting up a personal pension – a type of plan you can set up and contribute to yourself. You won’t get employer contributions, but you’ll still benefit from pension tax relief. This is where the government adds a 25 per cent top up to your pension contributions, so for every £100 you pay in, you get an extra £25. This increases if you are a higher or additional rate earner. Track down lost pension pots and combine them It’s a good idea to get on top of your old pensions and consider putting them in one place to ensure you’re paying competitive fees and don’t lose track of any savings. There is around £31.1bn sitting in inactive or lost pension pots, according to recent data from Pensions UK. It may be a good idea to then consolidate your pensions into one pot with a low fee, particularly if you have older pension schemes, which may be subject to higher charges than you would get in a newer scheme. High fees can quickly eat away at your savings. For example, a fee of just 1 per cent on a £20,000 retirement pot is £200 a year, compared to £50 if you were charged 0.25 per cent.