Retirement Income  

Which calls for pension boost for mothers

Which calls for pension boost for mothers

Consumer rights group Which is calling on the government to address the gender pension inequality by introducing a £2,000 cash boost for first-time mothers.

Due to maternity leave and reduced working hours for childcare responsibilities, mothers tend to save £15,000 less towards their retirement pension pot compared to most full-time working women, according to analysis from Which published today (June 3).

The research found that the average working woman who took time off for childcare duties saved about £68,000 towards retirement compared to £83,000 for full-time working women.

Which also found that the average male worker saved £114,000 during his career, which is about 27 per cent more than his female counterpart.

This gap increases to 40 per cent when taking into account women who take time off for maternity leave and childcare responsibilities.

To address the gender pension gap, Which is calling for first-time mothers to receive a £2,000 ‘new parent’ cash injection to their pension pots.

According to its proposals, each household would be able to choose which parent or guardian’s pension scheme the contribution is made to.

If no scheme was nominated, the sum would be made to an account with Nest, the auto-enrolment pension scheme set up by the government.

Kay Ingram, head of public policy at LEBC, said: "It is good news that the gender pension gap is receiving attention and Which and the PPI are right to attribute this to the additional caring responsibilities taken on by women both at the time of the birth of children but also in caring for grandchildren and elderly relatives which lead them to compromising their own careers and earnings."

Which is also calling for an increase in minimum pension contributions through auto-enrolment from 8 per cent to 12 per cent for middle-income earners, which it expects to boost pension pots by an average of £50,000.

However, it has said that the current 8 per cent minimum contribution level should remain for lower income earners to avoid over-saving and financial hardship.

Jenny Ross, editor of Which Money, said: "Since its introduction, auto-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.

"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."

Although extra funding may help boost women’s pensions, Ms Ingram believes that more should be done to make savers aware of current pension benefits.

Ms Ingram said: "While additional government funding may help, it is unlikely to materialise soon and there is evidence that the existing support offered is under-claimed. 

"Women are eligible for pension funding via workplace scheme payments during maternity leave [and there are] credits for state pension for stay at home parents and other relatives caring for children and carers of adults.