Part-time workers could face a pension penalty of up to £119,000, a new analysis has revealed.
The study carried out by Standard Life found that full-time employees earning £25,000 per annum from the age of 22, who paid the standard pension contributions every month of 3% employee and 5% employer, would have a retirement fund of around £434,000 when they reached the age of 66. However, if they switched to a three-day working week from the age of 35, they would only amass £315,000 by the time they reached that age.
The analysis showed that even just 10 years of part-time working could lead to a £18,000 shortfall in retirement. An employee would accumulate £44,400 between 35-45 years old, while part-timers working three or four days would amass £26,600 and £35,500 respectively over the same period.
Neil Hugh, head of workplace proposition at Standard Life, said: “Making the decision to switch from full-time work to part-time work is a significant one and is often triggered by life events like having a child. The decision has an obvious short-term impact on people’s take-home pay but the longer-term consequences for their retirement plans are often overlooked.
“The reality is that women are more than three times as likely as men to work part-time and it will often be women that have to think more carefully about whether they are on track for the retirement they want.
“At the Spring Budget the Chancellor announced that from September 2025 all working parents in England of children aged from nine months will be able to access 30 hours’ free childcare a week, which should help those who want to stay in full-time work do so, however having children is just one of many reasons for the gender disparity – others include women taking on more caring responsibilities for adults and cultural norms in some parts of society.”
According to Standard Life, the statistics highlight significant challenges in a society where nearly a quarter (23%) of employees work part-time, particularly as government data shows
big differences in the number of people who work part-time depending on social factors such as ethnicity and gender.
Hugh added: “There are steps people can take to minimise the impact part-time work can have on long-term finances. For example, it’s important to make sure you’re taking advantage of all the benefits that your pension plan offers. If your employer offers a matching scheme, and you can afford to do so, it’s worth making additional contributions so that your employer will match them.
“Additionally, if you have a partner, consider your retirement plans in terms of a household and the impact of working part-time could become less of an issue if you agree as a couple that one person will make additional provision.”