Every year spent out of work to perform unpaid care could leave pension pots £5,000 lower at retirement, a report from PensionBee has revealed.
The report, The Carer’s Pension Gap: Rethinking the Causes of Pension Inequality, found someone who needs to provide unpaid care at all "five key life moments" (caring for children, parents, a partner, grandparents, and grandchildren) could see their pension pot be worth almost £30,000 less at retirement.
PensionBee said this would lead to a "carers' pension gap", a difference of a pot being worth £222,000 at age of 67 and one worth £193,000 at the same age, producing an annual income of approximately £12,222 per year and £10,582 per year respectively (after taking a 25 per cent tax-free lump sum).
The findings showed that someone who has taken time out of work to care can expect a basic standard of living in retirement, with an annual income of approximately £20,000 including a full state pension and annuity at today’s rates.
This falls slightly short of the £23,000 that the PLSA recommends for a moderate standard of living in retirement.
This gap also extended to part time work as it was revealed that every year spent working part-time (three days a week) led to pension pot being roughly £2,000 per year lower at retirement.
The risk of losing out on pension savings was examined in the report as it revealed that two thirds of those surveyed (67 per cent) had taken time out of paid work to provide care to a family member.
While a higher proportion of female carers noted looking after their children as the reason for having taken time out of work (a factor believed to be a root cause of the gender pension gap which stands at 38 per cent nationally), it was discovered that male carers are more likely than female carers to look after their parents or partners.
PensionBee director of public affairs, Becky O’Connor, said: “We are a nation of carers. Millions of workers: both male and female, old and young, are filling the gaps created by a lack of social care and support, at great personal cost.
“It’s not a niche problem - nor is it necessarily gendered - although currently, women are more likely to face the consequences of the biggest gap, the childcare gap: the childcare gap."
O’Conner additionally said that, besides the pension gap being caused by childcare, there is a "strong case" to give attention to the impact of the multiple care moments faced by people in their late fifties and early sixties.
“As the government looks forward to address the labour shortage, particularly among older people who have left the workforce early, it’s imperative to find a solution that prevents people from missing out on key working years to avoid a pension shortfall in retirement,” she added.
