How can I get my pension back on track after taking time off to have children?

Rebecca Goodman

by , Freelance financial journalist

27 July 2021 /  

July 2021

Mother reading book to her two children.

There are lots of reasons why people take time off work after having children but stopping pension contributions at the same time can make a big dent to your overall retirement savings.

However, it is possible to get your pension back on track and to make up for the shortfall, by forward planning, topping up your pension, and making sure you’re receiving tax credits and breaks where you can.

Is my pension on track?

The first thing to do is check if your pension is on track for your retirement.

If it’s your State Pension, you can check via the government website. It will tell you how much you’re expected to get, at what age you’ll receive it, and how to increase it.

For private pension savings, such as one through a work scheme, you can check by contacting your pension provider. You can usually also do this through an online account if you have one or by checking your last pension statement.

Should I top up my pension?

If you’re worried about the amount of money you’ll be retiring on and you want to add to it, you can top up your pension contributions.

But before you start putting away more money it’s worth looking at exactly how much you’re aiming to have in retirement.

Couples need around £26,000 or £13,000 each to cover household essentials, plus extras such as holidays, according to research from Which?). And depending on when you decide to retire this could be quite a sizable sum, as our pension calculator suggests.

This is an average amount but a useful figure to use as a guide to how much you might need when you retire. If gaps in your contributions mean you’re way off your retirement goal, you can top up a private or workplace pension either through regular contributions or a one-off lump sum.

What to consider with regards to pension contributions

Your pension contributions may have changed while taking time off work.

For those with workplace pension schemes, an employer has to continue making payments while employees are receiving maternity or paternity pay for up to 39 weeks, at the level it was paying before you went on leave.

However, your salary may have fallen during this time and you’ll only need to pay a percentage of the lower rate. If you stopped making contributions altogether this affects both your entitlement to the state pension and the overall size of your pension pot.

If you stopped making contributions altogether this affects both your entitlement to the state pension and the overall size of your pension pot.

Therefore it’s important to start putting money away again as soon as you can. Even if your salary has dropped or you’re not working at all it’s still possible to benefit from government tax breaks.

If you earn £3,600 or less, or you’re not earning at all, you’re able to put away a total of £3,600 each year. The government tops up these contributions, so the maximum you can put away is £2,880 and it’ll add the rest up to the limit.

So if you’ve got the cash to spare, either from savings or another source, by adding it to your pension you’re getting a small extra bonus from the government and boosting your retirement income.

How can I boost my State Pension?

To receive the full State Pension, of £179.60 a week or £9,339 a year, you’ll need to have made National Insurance (NI) payments or credits for 35 years.

But if you’ve taken time off to look after children, like many parents do, or you haven’t returned to work, you’re likely to have gaps in your NI contributions.

One way to build up these credits is by claiming child benefit, which is something all parents should do.

Even if you aren’t eligible for the benefit, such as if you or your partner earn more than £60,000, you should still apply as this means you’ll get the NI credit which counts towards your state pension entitlement.

Taking a longer career break to raise children

It’s not always women who take time off to look after babies or young children, or reduce their working hours, but they are more likely to.

Around 28.5 per cent mothers with a child aged 14 or under has reduced their hours because of childcare reasons, compared to 4.8 per cent of fathers, according to the Office for National Statistics.

A major reason is the cost of childcare, with the average cost for sending a child under the age of two to nursery for 25 hours a week coming in at £6,800 a year, according to the Family and Childcare Trust.

However, even if you stopped or reduced your pension contributions over a longer period, it is possible to get your pension back on track.

However, even if you stopped or reduced your pension contributions over a longer period, it is possible to get your pension back on track.

The first thing to do is to increase the amount of money you’re putting away. The amount you can save will depend on your financial circumstances but if you can reduce other costs in any way, and redirect this money to your pension, it will make a big difference to your retirement income.

For example if you’re still paying for childcare costs, there are lots of ways to save money including taking advantage of the government’s tax relief childcare scheme and applying for free nursery hours if you’re eligible for them.

It’s also worth remembering that whatever you’re putting away will help and as soon as you start paying into your pension again your pot will start to rise again.

Rebecca is a freelance personal finance journalist writing stories about how money affects us all and how to make the most of yours. She regularly writes for several national newspapers including the Independent, the Mail on Sunday, the Sun, and the Guardian along with a number of specialist publications. You can find her on twitter @rebeccahgoodman.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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