Many moms in the UK who juggle or put their jobs on hold owing to the financial strain of children suffer a pension penalty of up to £183k, according to Royal London.
There is a significant difference in the employment choices taken by men and women after having children, according to the research “Tackling the gender pension and wealth gap.”
Research indicates that women are more likely to cut back on work hours to take care of their children; over 25 per cent of them have thought about quitting or working part-time.
Additionally, around 50 per cent of male employees don’t think about making such adjustments. In the UK, almost half of families have a father who works full-time and a mother who works part-time until the youngest child is eleven years old.
Only 75.6 per cent of mothers work, compared to over 90 per cent of fathers with dependent children. 1.65 million fewer women than males are working in the UK, which leads to a gender disparity in the labour force. By juggling childcare and working part-time until their child enters secondary school, moms risk missing out on about £92k in pension funds. A complete cessation of employment during this time results in a significant pension deficit of £183,000.
In addition to having an impact on retirement savings, this gender gap lowers eligibility for the State Pension because fewer people are contributing to National Insurance. Even while receiving Child Benefit can result in NI credits, women’s longer life expectancies make things more difficult and lead to lengthier retirements with smaller pension funds.
Royal London pensions expert Clare Moffat says: “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.
“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.
“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.”
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