Millions of unpaid carers could see thousands wiped from pensions

Unpaid carers, predominantly women, set to suffer extreme shortfalls to their pension pots

Unpaid carers who are usually women could see thousands wiped from pensions
(Image credit: Getty Images)

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 that 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.”

The warning comes ahead of Carers Week, which runs from June 10 to 16.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: “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. As we anticipate a new government, says Becky O’Connor, director of public affairs at PensionBee, “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  

One issue raised, however, is that carers are not utilising the state support on offer. Rachael Griffin, tax and financial planning expert at Quilter, says: “Despite the availability of carer’s credits, which safeguard pension benefits, it is concerning that thousands of Britons do not claim them. These credits are crucial for those who may not receive a carer’s allowance but still provide care for at least 20 hours a week. Individuals between 16 and the state pension age are eligible and can apply through the Department for Work and Pensions website.

Chris Newlands

Chris is a journalist, editor and writer, having previously been an editor and journalist at the Financial Times and the business and money editor at The i Newspaper. He is also the author of the Virgin Money Maker, the personal finance guide published by Virgin Books, and has written for the BBC, The Wall Street Journal, The Independent, South China Morning Post, TimeOut, Barron's and The Guardian. He is a graduate in Economics.