Women who take time off work to care for their children face a pensions gap of up to £15,000, a report released on Monday by Which? found.
The government must act, the report said, suggesting a £2,000 top-up for new mothers to avoid uneven pensions saving.
The report, conducted by Which? and the Pensions Policy Institute, found women who take time off to care for children face a “motherhood pensions penalty” across their lifetime.
The report found the average working woman who took time off work for childcare duties would save £68,000 towards retirement, compared with £83,000 for working woman who took no time off.
Jenny Ross, Which? money editor, said: “Since its introduction, automatic enrolment has successfully drawn in millions of new savers to workplace pensions, but ‘the motherhood penalty’, which already impacts women’s income, threatens to leave those who choose to work reduced hours due to childcare responsibilities significantly worse off in retirement.”
We need a more systematic approach to recognising the caring contribution that is still disproportionately made by women
Sam Smethers, Fawcett Society
She called on the government to act. “If the government is committed to pension equality it should introduce a £2,000 pension contribution for first-time mothers, and also raise the minimum contribution rate for all middle-income earners to ensure they can retire with an adequate pension pot.”
The report builds on research conducted by Which? last year, which found a gendered disparity on state pension benefits. The average man received £153.86 a week, compared with the average woman receiving £125.98 a week, amounting to almost £29,000 more over a 20-year retirement.
Sam Smethers, chief executive of the Fawcett Society, welcomed the new research. “We know that women’s earning power takes a hit when they have children and that penalty grows throughout their lives. By the time they retire their pension pots are worth significantly less than men’s,” she said.
But the proposals recommended by Which? are not enough to confront gender inequality in pension saving, Ms Smethers said. “A £2,000 top up is better than what they have now, but still clearly inadequate given the £15,000 gap that exists. We need a more systematic approach to recognising the caring contribution that is still disproportionately made by women.”
Instead, she highlighted a proposal outlined by the Fawcett Society in 2016, for the government to establish an auto-enrolment credit to those eligible for credits as carers under the state pension system.
“A carers’ credit, topping up [women’s] private pension pot throughout their lives, could make a real difference,” she said.
