Millions of unpaid carers could see thousands wiped from pensions

Britain’s five million unpaid carers are being warned they face a pensions cliff edge later in life, with many set to lose out on tens of thousands of pounds in retirement.

Research from insurer Royal London shows that millions of people - predominantly women - will suffer from extreme shortfalls in their pension pots as a result of taking time out of work to care for someone.

The company says many adults take time off work to help take care of a family member “but rarely stop to consider the effect this will have on their retirement pot”.

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And, because women are more likely to be carers than men, it is also adding to the gender pension gap, says Royal London. 

It calculates that a woman who stops working at the age of 55 to care for a relative will have a £65,000 black hole in their pension pot compared with someone who continued working until 67.

Pensions gap: women twice as likely to take on caring role

Clare Moffat, pensions expert at the insurer, says: “Caring responsibilities mean a million women below age 50 are not in employment while many more take on lower paid part-time jobs to allow them to juggle both.

“Figures from the Office for National Statistics show that older female workers are twice as likely as their male counterparts to take on caring responsibilities – which unfortunately comes with a long-term cost to their retirement savings if they pause pension contributions.”

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, adds: “Women face a double whammy of challenges at either end of their career that squeeze their pension prospects like a vice.”

Some are calling for government action as a result. Becky O’Connor, director of public affairs at PensionBee, says “it is crucial a review of the adequacy of the state pension and benefit provision for carers, in light of the impact on their private pensions, takes place”.

PensionBee’s own research finds that two in three people are likely to take time out to provide unpaid care at some point during their working life and that for every year spent out of work to perform unpaid care, a pension pot is roughly £5,000 lower at retirement.

O’Connor adds: “Millions of workers are stepping in to fill gaps in social care at great personal cost. The chance of this affecting any one of us throughout our working lives is high. The consequences go beyond pensions and security in later life, affecting people’s careers, personal lives, and the UK economy.”

Support for carers  

If you are caring for someone and do not get a carer’s allowance, you may still be eligible for carer’s credits that count towards your state pension entitlement. 

You must be between 16 and state pension age and look after one or more people for at least 20 hours a week.

A Freedom of Information request by the wealth manager Quilter, reveals there was a 55% increase in the number of people who claimed carer’s credits in the 2023/24 tax year, compared to the average over the previous four years.

Last year, 9,040 people claimed the credit compared to an average of 5,836 people per year since 2019/20.

Jon Greer, head of retirement policy, at Quilter says: "Providing care for a family member can significantly impact your financial situation. However, it can also have a devastating impact on your future state pension entitlement too. Encouragingly, more individuals are now taking advantage of carer’s credits to ensure they don’t end up with gaps in their National Insurance record and don’t receive the full state pension as a result.

“The new Labour government with its large majority must tackle the social care crisis. The UK’s social care system is crumbling, and Britain’s unpaid carers pick up the slack, so it is only fair that they receive at least a pension credit in return."