Addressing the motherhood pension penalty


20th July 2019

When it comes to pensions, women often get a raw deal, relative to men.

Lower lifetime earnings, combined with career breaks to raise children and care for relatives, are factors which result in less money in later life.

Maternity leave and reduced working hours due to childcare commitments result in an average of £15,000 less saved by women when compared with the typical full-time working woman.

But what can be done to put women on a better footing when it comes to their retirement savings?


Cash bonus?

One suggestion is to give all first-time mothers a cash bonus for their pension pots.

The consumer group Which? is proposing the £2,000 pension top-up, from the government, for new mums. This top-up is designed to compensate mothers for the retirement savings potential lost when they are off work, raising their children.

In making its recommendation, they suggest that the pension top-up payment would help address a so-called “motherhood pension penalty”.

The analysis in the report, which was carried out by the Pensions Policy Institute, found that mothers suffered from the gender pensions gap to an even greater extent than other women who did not become parents.

Mums can save an average of 40% less towards their retirement than male workers. The analysis found that male workers save an average of £114,000 during their careers.

The gender pensions gap between men and working women who do not have children was a little better, at a still significant 27%.


Pension equality?

Jenny Ross, money editor at Which?, claimed this motherhood pension penalty was threatening to “leave those who choose to work reduced hours due to childcare responsibilities significantly worse off in retirement.” She said:

“If the Government is committed to pension equality it should introduce a £2,000 pension contribution for first-time mothers.”

Steve Webb, director of policy at mutual insurer Royal London, is backing the campaign from Which? He said:

“There’s clearly a ‘pension penalty’ for new mums.

“Our pension system is structured around the idea that our income in retirement will come from both the state system and a private pension. We have long thought that mothers should not be penalised when it comes to their state pension and offer National Insurance credits to those who are at home with children.

“But their private pension pot will also suffer if their earnings are reduced.  A pension top-up for new mothers would help to address this problem and reduce the ‘pension penalty’ which they face.”

The top-up proposals for new mothers seem like a sensible suggestion to help address the pensions gender pay. But it’s only a start. More would need to be done to place men and women on an equal footing when they retire.

Which? is also recommending that the government increases the minimum contribution levels for workplace pensions from 8% to at least 12%. Doing this would boost retirement savings for middle-income earners.

Higher minimum pension contributions would result in an additional £50,000 saved towards retirement, for an average earner.



What next?

Do get in touch to understand how much income you are forecast to have in retirement as things stand, and the steps you can take to boost this retirement income, to secure the living standard you want once you finish working.

If you’d like to know more, simply contact us on

We’re here to help; always.


Chris Broome FPFS

Owner & Chartered Financial Planner

01327 223243

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