Guest post: “The ‘motherhood pension penalty’ is a widely acknowledged issue”

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Just over 15 years ago I became a mother for the first time, and five years later I welcomed my second child.

The first time round, I took nine months of maternity leave before returning to work, but with reduced hours so I had time to care for my daughter.

After my second child was born, I decided to work compressed hours - squeezing 37 hours into a four-day week.

Looking back, it is hard to believe that I didn’t take a career break when I had two children under six and was juggling childcare duties and a full-time job. It’s easy to see why so many women make the decision to spend more time at home at that stage in life.

The decision to work reduced hours was not an easy one, but it meant that I had time to do some of the school runs and take care of my family - without racking up an eye-watering childcare bill.

Of course, the extortionate cost of childcare is one of the main reasons why many mothers consider working reduced hours or taking a career break.

Choosing to work reduced hours meant taking a pay cut, which I was happy to do if it meant more time at home with my daughter. However, I never considered how that could impact my workplace pension savings.

A reduced salary meant smaller monthly contributions, which would lead to a smaller pension pot when I retired - a situation commonly referred to as the “motherhood pension penalty”.

Research from a new Which? report has revealed that an average-earning mother working part-time due to childcare responsibilities could miss out on between £500 and £1,000 in pension contributions each year. Because savings grow over time, this means mothers working part-time could be £15,000 worse off in retirement.

When compared to men, who already earn more than women, this pension gap widens significantly - average-earning mothers who work reduced hours could be about £45,000 poorer in retirement than an average-earning man.

The “motherhood pension penalty” is a widely acknowledged issue within the pensions industry, but as yet, there is not a fix. It’s a significant element of the wider pension inequality problem, which sees men consistently getting a better deal than women in retirement.

Which? is calling for the government to give all new mothers a £2,000 top-up into a workplace pension to help address the shortfall and offset the loss to their pensions if they decide to work part-time.

Acknowledging that every family is different and many fathers also choose to take time out from their career or work reduced hours, we are proposing each household be given the choice whether the contribution is paid to another parent or primary carer.

A £2,000 cash injection could grow to as much as £7,500 if the funds stay invested for thirty or forty years, which could make up for some of the loss in savings mothers suffer when they work reduced hours due to caring responsibilities.

We want Amber Rudd - the Work and Pensions Secretary who has just taken up the role of Women and Equalities Minister - to look seriously at introducing this proposal.

Working women deserve a comfortable retirement, but the consequences of working reduced hours when we have children and taking that hit to retirement savings could come back to bite us.

The workplace pension has been hugely successful since its introduction, but it is time for the government to review the scheme to ensure it works for everyone.

We’d love to hear about your experience of this too, so please get involved and share your stories in the comments.

great stats there, good work. 😂😂😂 I had no intentions of finding facts, you tried to task with me that.

I do understand how some working juggle their lives as I see my family and friends do this. I only ever spoke about my own experience and that of the people I know. I never generalised all working parents to be the same, and I never said working parents put their children all through the holidays ( I cleared that up on the last thread you attacked me on, I said 7 weeks holiday not meaning the full 7 week consecutively, but why let that correction stand in the way of your ranting attack )

I do own my choices, that's is why I voice them, if I didn't own them, I would keep them to myself, and as previously shown, I don't make assumptions of all working parents, just the ones I know.

If you are bored of seeing any opposition to your views ( or it appears to just be mine) I think you can hide people or something like that, or simply ignore them and stopping attacking me when I am commenting on public thread.

You do appear to get emotional about it as you get quite personal with your "run along" and me 'chiming in", it's quite rude and unnecessary when I'm not even aiming my original comments to you. I'm simply giving a view point as are you, I'm not judging anyone, it's my opinion and I really don't need to "feel better about myself" I am really quite happy as I am.

Just stating you’ve understood something doesn’t make it so. Your points would suggest otherwise. I can’t think of a single way in which being a SAHM for school aged kids contributes to Society unless you are making real headway with some sort of Charity work on a regular basis. Also you still don’t seem to appreciate the massive financial risks of being SAHM. I honestly don’t see many informed choices being made. Mostly sticking fingers in ears and hoping for the best. In order to solve the problem women need to stop being dependent and blindly trusting in another human to do the right thing by them.

@Gatoadigrado again, I have never said a working Parents put their child in childcare all holiday. I said very few parents don't need to use some childcare in the Holidays, it was picking up on another posters comment.

Nor have I said that it makes a parent less or a child not as well adjusted to use childcare, just not my choice. I said it shouldn't make a successful society by having all children needing to rely on childcare, which was a response to someone talking about SAHP thinking if the wider picture and contributing to society.

I have never discredited the debate or said it wasn't important. I was informing that SAHP can also have pensions (rather than an assumption non do) but they obviously would be less as the employer is not topping it up. I am nor have I ever said it can't make women financially worse off, just that most (I know ) are aware of this and take that risk with all the information gathered, and it's a viable choice to them.

Also you still don’t seem to appreciate the massive financial risks of being SAHM.

How have you drawn this conclusion of me?

You simply don't know my financial situation.

I have clearly stated that I am aware of the risk.
I have stated women should be made aware of these risks
Women should not be forced to stay at home
Women should not be forced to go to work

Just because I choose to live my life differently to you, does not mean I have not made an informed decision

But no one has suggested that a successful society is to do with all children being in childcare! I just find that an odd statement. A successful society is about so much more than whether a child goes to nursery or not

A successful society is about so much more than whether a child goes to nursery or not

Yes i completely agree there are lots of ways in which someone can contribute and it makes no difference if there child is at home or at nursery, society takes all kinds of contributions to make it successful and it all shouldn't be about being financial.

I struggle to believe that women's contribution to society overall, in child-rearing, paid work, other caring, everything, is reflected fairly in the pensions they currently receive. Putting aside that most of the rewards of the increase in productivity over the last 20 years or so has been hoovered up by the top 1% - or even 0.1% richest families, which could instead be used for higher state pensions... state pensions could be increased paid for partly by getting rid of tax relief for work pensions. This relief helps lock in the inequalities in wages (and men's and women's paid work and unequal wages) into retirement.

Retirement is not really paid for by the person who saved for it; it's paid for by the younger generation through their work, taxes, lower wages enabling company profits or high rents. Why do people who have been paid a lot in the past deserve more of this pile? They've already been rewarded for their work through their wages. Why should they get more than people who have done low paid but useful work? Or disabled people who have never been able to work? Or carers? They are all doing the same thing in their retirement.

I don't agree with the £2000 - a much bigger look at this is needed.

If a tweak is wanted, having provision for going part-time is good, but it's only half of the problem around maternity/small children. Being able to step back in is the other half. Once you have a family, it's harder to move for work (schools, partner working), and the availability of jobs you are qualified for can be limited. So provision for upping the hours for those who have reduced them to care for small children when/if they become available is important. Men are generally not in the position of having to re-compete for full time hours, as they are generally not the ones who drop the hours in the first place. It would help if there was a statutory right for people who have gone part time to care for small children to have first refusal of full-time posts in the same job if/when they come up.

Tartypants- the message that the govt has been giving loud and clear over recent years is that the state pension is not going to get better: the qualifying age has increased and will continue to increase in future. Auto enrolment reflects the fact that people need to be making other provision so that the state pension becomes ideally a ‘top up’ rather than a sole source of income.

As for the point that why people who have earned more and paid in more to their pension be rewarded by higher pay outs- well, id have thought that was obvious. If you pay more in, you’ll get more out. I pay hundreds of pounds every month into my workplace pension. If someone in my workplace who only works part time, paying in only half of what i do is going to entitled to the same amount of pension then why on earth would anyone bother working and earning more? And if they did continue to work full time, you can be sure they’d find other ways of saving or spending their money rather than paying it into a pension that isn’t going to reflect what they’ve put in.

You mention people with disabilities that have prevented them from ever working. People in that position are rightly supported through benefits. This thread isn’t about people who can’t work though, it’s really about the choices that people (and disproportionately women) make which put them in a vulnerable position financially.

I disagree wholeheartedly with your final point about people who are working part time getting first refusal on full time jobs when they want them. Success in achieving a post should be based on merit - the best person for the job. If that happens to be someone who’s been part time then no problem, but it could equally well be someone who’s moving into the area, or going for the job as a promotion from their current one, or plenty of other scenarios.

The real solution to the issue is for women to be fully informed about the financial impact of their decision making. It’s not about trying to make everyone do the same thing... there will always be some women who don’t return to work, or only work part time, or choose less stressful jobs after having kids, just as there will be women who step straight back into their previous job after ML. The key issue is about making these decisions with awareness of the long term as well the immediate impact.

It's a no from me.
It infantilises women and £2K, as far as pensions are concerned, looks like pocket money allowance for the little wifey to me.

As a childless woman who has worked her arse off full time for many years and sorted my own pension - it's a no bloody way from me. It is the individual's responsibility to sort out their own pension. If people choose to work part time for whatever reason then they should deal with the consequences of that choice. The NHS is on its knees, I'd much rather the govt funds that rather than wasting money on other people's lifestyle choices.

I hear you leighpenny! I do have kids but would never expect other people to fund my foolish choices if I made them. Watching “ Broke” on BBC the other night had me in tears. People literally on the bones of their arse with nothing. We need to be focusing on giving help where it’s needed not on people who just expect the world to look after them

Just another thought, it would also disproportionately benefit those who have children at a young age (due to the length of time the money would be invested until retirement) rather than those who wait until they are financially stable and generally much older before starting a family. Not necessarily a bad thing but if it becomes seen as a payment to those who haven’t yet even started work it would be classed as unfair. Surely there would be a (large?) proportion of women who would have had to have worked for a significant number of years on minimum wage to equal that level of pension payment had they never had a baby?

Another very good point Mulberry.
The idea is totally bonkers really

Gatoadigrado but the system now is set up as it is to encourage mothers to go back to work full time after having a baby - is that really a good thing? If the taxpayer is paying for childcare, shouldn't they be prepared to pay the people most motivated to do a good job, namely the child's own parents? This could be done by a pension contribution. Instead, by associating pensions with paid work, the incentive is for parents to return to full time work rather than look after their own child, while meanwhile the taxpayer pays someone else to look after it. It just doesn't make sense.

If the state pension is not enough to live on, that erodes the incentive to save for a pension, because people who haven't, will likely get a top up (they do now anyway). So if you're struggling to make payments into a scheme now, and might not actually gain in the future (as if you hadn't paid in, you would be eligible for pension credit) it's not that stupid not to save. Anyway it will all depend on what's affordable at the time of retirement. I've absolutely no confidence that either my work pension or the promised state pension will pay out when it comes to it. If the economy can't do it when I retire, it just can't. Or maybe we'll be outvoted by two angry generations of younger people who blame us for trashing their planet and vote for low state pensions, high taxation of private pensions &c.

Today 00:38 Tartypants

‘Gatoadigrado but the system now is set up as it is to encourage mothers to go back to work full time after having a baby’

Actually I think the system recognises far more than at any time in the past, that parents want a degree of flexibility. And that word, parents, is key, because it shouldn’t just be about mothers.

Hence, in recent years legislation to enable the parents to split the year or maternity leave between them. Likewise with the length of maternity leave which has quadrupled over the last 30 or so years. And the right to request flexible working.

It’s not about ‘forcing’ mothers into full time work straight after having a baby. This is about getting people to understand the consequences of their decision making, and thereby hopefully see fewer women in poverty in their older age.

The bottom line is though, of course the more you pay into a pension (and the more the employer proportionately puts in reflecting your salary and hours worked) then quite rightly the more you will get out. That’s simple economics. People should be rewarded for their time and money.

I have no personal axe to grind here because as I’ve already mentioned, I dropped to 3 day a week when my babies were small. My pension took a hit through that but I made sure i returned to full time work as soon as my youngest turned 4 to mitigate it as much as possible. I also steadily took promotions over the next 20 years after this to increase my pension too.

As I’ve already said, the options available now are better than at any point in history. If I were having my babies now, I’d probably take 6 months off, transfer 3 months to dh and I’d return 4 days a week, but sadly this wasn’t available back then and also doing more than 3 days with a 12 week old baby who was still bf before being dropped at the childminder early morning would have just been too difficult.

We’re all functioning within the parameters of when we happen to give birth, but my point is, the situation is better now than it’s ever been to enable equity between the mum and dad in terms of earning and caring, and women would be wise to think carefully about the long term.

also it’s not just about the years immediately after giving birth when the kids are very little. A significant proportion of mothers don’t return to full time work for literally decades... I have female colleagues in their fifties with adult children who have continued to work only 3 or 4 days a week since they gave birth, and are only now realising how screwed their pensions are.

but the system now is set up as it is to encourage mothers to go back to work full time after having a baby - is that really a good thing? If the taxpayer is paying for childcare, shouldn't they be prepared to pay the people most motivated to do a good job, namely the child's own parents? This could be done by a pension contribution. Instead, by associating pensions with paid work, the incentive is for parents to return to full time work rather than look after their own child, while meanwhile the taxpayer pays someone else to look after it. It just doesn't make sense.

I agree with this @Tartypants it really doesn't make sense.

I think this is aimed more at parents who have school aged children, where the need for care for their child through the day is not required and they still take years off. I still believe it is their choice and so long as they are making the decision from an educated stand point, then it is their choice to make.

And I definitely don't think making derogatory and insulting name calling comments about people who make said choices is helping the discussion at all

Having an additional contribution made by an employer is obviously a perk aimed at working parents ( and not always reflective of hours worked some high paid part time workers earn more than minimum wage full time workers ) it would be good if a SAHP had their pension matched, so they had to contribute initially. But currently we don't have a society that values our SAHP as other countries do and our economy definitely could not support that, so it would not be feasible to use such a scheme in this country.

If women currently don’t go back to work because the immediate financial equation doesn’t balance then I can’t see those women (because we hear all the time that such ‘expenses’ don’t always come out of the family pot) paying into a pension to be matched by the government would happen either?

SAHP along with other non tax payers can contribute £2800 (ish) to their pension annually and receive basic rare tax relief. It's a start... you can add this to a pension you had whilst working, often but dependant on pension type.

Plus - and this £ also needs to come out of the family 'pot' - the SAHP also needs to contribute to an ISA or other vehicle every year to build up their own retirement fund.

I think SAHP are getting a bit of a rough ride on here. We aren't all totally financially illiterate. Most of us worked pre-children and some of us had well paid jobs and pensions and some of us may again.

Some of us would love to work more but the childcare so called 'options' - are a bag of shite - once the well regulated nursery years are over. By this point your children are happy and settled in schools and friendships etc and the husband now has a slightly easier commute. The SAHP has to move house to find decent childcare for when their children are in a certain age group. Not easy.

Re the OP - £2k bung probably isn't helpful or warranted. Focus on educating people that over time their pensions will suffer massively if they go part-time or forgo paid work altogether and that they and their partners must provide accordingly.

Moreover - ensure decent quality childcare options exist for families to enable parents to work. It's not just about the cost. Our local before and after school facilities are cheap enough but many kids just hate going due to overcrowding, pot organisation and very poor facilities.

SAHP along with other non tax payers can contribute £2800 (ish) to their pension annually and receive basic rare tax relief. It's a start... you can add this to a pension you had whilst working, often but dependant on pension type.

Plus - and this £ also needs to come out of the family 'pot' - the SAHP also needs to contribute to an ISA or other vehicle every year to build up their own retirement fund.

I think SAHP are getting a bit of a rough ride on here. We aren't all totally financially illiterate. Most of us worked pre-children and some of us had well paid jobs and pensions and some of us may again.

Some of us would love to work more but the childcare so called 'options' - are a bag of shite - once the well regulated nursery years are over. By this point your children are happy and settled in schools and friendships etc and the husband now has a slightly easier commute. The SAHP has to move house to find decent childcare for when their children are in a certain age group. Not easy.

Re the OP - £2k bung probably isn't helpful or warranted. Focus on educating people that over time their pensions will suffer massively if they go part-time or forgo paid work altogether and that they and their partners must provide accordingly.

Moreover - ensure decent quality childcare options exist for families to enable parents to work. It's not just about the cost. Our local before and after school facilities are cheap enough but many kids just hate going due to overcrowding, pot organisation and very poor facilities.

I am in total disagreement. Having children is a choice, it's not an obligation. So why on earth should the government pay any more to help those that choose to have a child?

It's nonsense. If you can't afford to cater for your retirement and have kids you need to rethink your choices.

I am in total disagreement. Having children is a choice, it's not an obligation. So why on earth should the government pay any more to help those that choose to have a child?

It's nonsense. If you can't afford to cater for your retirement and have kids you need to rethink your choices.

I am in total disagreement. Having children is a choice, it's not an obligation. So why on earth should the government pay any more to help those that choose to have a child?

It's nonsense. If you can't afford to cater for your retirement and have kids you need to rethink your choices.

If women currently don’t go back to work because the immediate financial equation doesn’t balance then I can’t see those women (because we hear all the time that such ‘expenses’ don’t always come out of the family pot) paying into a pension to be matched by the government would happen either?

Yes if they don't go back due to finances then obviously this scenario would not happen, but I was talking about SAHP with the choice, (not forced back due to finances as most I know aren't forced back in, I know more parents forced back to work rather than those forced to stay at home ).

I am in total disagreement. Having children is a choice, it's not an obligation. So why on earth should the government pay any more to help those that choose to have a child?

It's nonsense. If you can't afford to cater for your retirement and have kids you need to rethink your choices.

But I couldn't see anyone disagreeing that the education and awareness of this situation should be given, although I don't understand how people could not grasp the fact that by not paying into a pension it then reduces your pension. Surely these are just choices women are now making from an educated position.