Urgent warning for parents caring for disabled children facing £138k shortfall in retirement – and how to avoid it
MILLIONS of parents caring for disabled children are being urged to check they are saving enough for retirement.
Shocking new figures show parents of disabled children who leave the workforce to care for their kids may be up to £138,000 worse off in later life compared with typical workers.
The calculations, provided exclusively to The Sun from pension provider The People’s Partnership, found this is because they aren’t contributing to a workplace pension.
It means they also don’t benefit from employer contributions or the growth of their pot of cash through investment returns.
The People’s Partnership found around 6.7million people across the UK may be worse off in retirement because of their caring responsibilites.
Its research found that around two thirds (64%) of parents of disabled children are worried about their finances in the future.
The group is now calling on employers to allow parents greater flexibility to balance working with caring responsibilities, so they aren’t forced to sacrifice their retirement savings.
Even some flexibility to allow parents to come back to work part time can make a significant difference to their ability to build up a pension pot.
Parents who return to work part-time are typically £49,000 better off than those who don’t work at all, The People’s Partnership calculated – although they are still £89,000 worse off than parents who work full-time.
Parents who are able to return to work full-time benefit far more.
Those who take a career break to care for their disabled child, but are eventually able to return to work full time are typically £83,000 better off in retirement than if they had never returned.
Richard Kramer, chief executive of disability charity Sense, said: “This research highlights the stark reality for parents of disabled children, who face significant financial hardships due to their caregiving responsibilities.
“Very few parents, who are struggling day to day, will have the luxury of thinking about retirement, so it is little surprise that they’re at such a disadvantage when it comes to saving.
“Local and national government must commit long-term resource and funding to support families, and employers must do their bit too by creating more supportive environments with improved flexible working policies.”
She has been unable to return to her job at Gatwick Airport, where she used to work as a contract manager where she received a pension, meaning she has lost out on over a decade of retirement savings.
She said she gets around 48p an hour in carer’s allowance, which has meant she hasn’t been able to pay anything into her pension at all.
“Having a child that needs support for the rest of their life, combined with rising living costs and skyrocketing mortgage payments has meant my previous hope of a comfortable retirement will remain a distant dream,” she said.
Maria said she thinks employers need to be doing more to help parents with disabled children.
“A lot of employers, unless carers themselves, don’t understand the challenges carers face on a daily basis,” she said.
Why are retirement savings impacted by taking time out of work?
When you join a company, you are usually automatically enrolled into its workplace pension scheme.
This means you contribute some of your salary each month to your pension, and your employer also contributes a percentage.
If you don’t join a workplace pension scheme or opt out of your company’s scheme, you don’t benefit from the extra cash from your employer.
The minimum contribution is 5% for employees and 3% for employers, although some employers will increase their contributions if employees increase their own.
The money in your pension is then invested on your behalf with the aim of growing the pot over time – giving you even more free cash.
And the larger your pot is, the bigger the returns can be.
We recently that revealed research by Interactive Investor found that if you put £50 into your pension each year, you would accrue £76,301 over 40 years, despite only putting in £24,000 of your own money.
If you don’t contribute to a pension or take a break from contributing, you miss out on the employer contributions and the investment returns.
By giving up an average of £138,000, typical parents of disabled children could lose over nine years’ worth of retirement savings, based on recent calculations.
Single pensioners need at least £14,400 a year to cover essential living costs in retirement, while couples need £22,240, according to the Pensions and Lifetime Savings Association (PLSA).
Other ways to build pension savings
If you are unable to return to work full-time, there are other ways to build extra pension savings.
You can open a person pension and contribute a small amount every month, and the pension provider will invest it on your behalf – meaning you will benefit from the returns long-term.
If you are caring for a child, make sure you are claiming National Insurance credits through your child benefit form to ensure you receive the maximum state pension in retirement.
Taking years out of work can leave gaps in your NI record which can reduce your state pension, but you can claim credits to fill these gaps in.
Read our guide to ensure you are claiming the credits.
Carers can be eligible for certain benefits, such as carer’s allowance, while the child they care for may also be entitled to payments themselves.
A number of charities have benefits calculators that you can use to work out what you are entitled to, including:
- Turn2Us
- Policy in Practice
- EntitledTo
Nicola Sinclair, head of responsible business at People’s Partnership, added that you should speak to your employer about flexible working options.
“The new law that came into force earlier this year means employees can now request flexible working from their first day of employment and make two flexible working requests within a 12-month period – providing greater flexibility for balancing work and caring responsibilities,” she explained.
What is pensions auto-enrolment?
HERE's what you need to know about pensions auto-enrolment:
What is pension auto-enrolment?
Since October 2012, employers have had to enrol their staff into workplace pension schemes as part of a government initiative to get people to save more for retirement.
When does auto-enrolment apply?
You will be automatically enrolled into your work’s pension scheme if you meet the following criteria:
- You aren’t already in a qualifying workplace scheme.
- You are aged at least 22.
- You are below state pension age.
- You earn more than £10,000 a year
- You work in the UK.
How much do I contribute?
There are minimum contributions that you and your employer must pay.
Your minimum contribution applies to anything you earn over £6,240 up to a limit of £50,270 in the current tax year. This includes overtime and bonus payments.
A minimum of 8% must be paid into the pension, with you contributing 5% and your employer paying at least 3%.
What if I have more than one job?
For people with more than one job, each job is treated separately for automatic enrolment purposes.
Each of your employers will check whether you’re eligible to join their pension scheme. If you are, then you’ll be automatically enrolled in that employer’s workplace pension scheme.
Can I opt out?
You can choose to opt out, but you’ll miss out on the contributions from the government and from your employer. If you do choose to opt out you can opt back in later.