Two in three people are likely to take time out to provide unpaid care at some point during their working life which will impact their pension pots, according to PensionBee.
The Carer’s Pension Gap research examined how widespread unpaid care is in the UK and how it impacts people’s retirement savings.
It found that key care moments when people commonly take time out of work include caring for children at 48%, parents at 30%, partners at 21%, and grandparents at 15%. Among carers aged 55 to 64, 19% are responsible for caring for grandchildren. These care moments typically occur in the late 50s or early 60s, leading up to retirement.
According to PensionBee, each year of unpaid care costs £5,000, and each year of part-time work (three days a week) costs £2,000 of the pension pool. Male caretakers are more likely to care for parents or spouses, but female carers frequently prioritise children, contributing to the 38% gender pension discrepancy.
A projected retirement pool of £193,000 compared to £222,000 at age 67 might result in a Carer’s Pension Gap of almost £30,000 if you provide unpaid care at all key care moments.
The Carer’s Pension Gap report also reveals that individuals facing the gap could receive a retirement income of around £12,222 per year with a larger pot of £222,000, compared to around £10,582 with a smaller pot of £193,000. An annual income of about £20,000 is typical for adults who have taken time off from work to care for others, which is a little less than the £23,000 that the Pensions and Lifetime Savings Association advises for a moderate retirement.
PensionBee director (VP) public affairs Becky O’Connor said: “We are a nation of carers. Millions of workers; both male and female, old and young, are filling the gaps created by a lack of social care support, 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 also the UK economy.
“It’s not a niche problem – nor is it necessarily gendered – although currently, women are more likely to face the consequences of the biggest gap: the childcare gap. Besides the pension gap caused by childcare, it’s clear there is a strong case to give attention to the impact of the multiple care moments faced by people in their late fifties and early sixties.
“As the Government looks to address the labour shortage, particularly among older people who have left the workforce early, it’s imperative to find a solution that prevents people from missing out on key working years to avoid a pension shortfall in retirement.”