Give all new mums £2,000, say campaigners
Analysis shows that women who take time off to care for a child save around £68,000 into their pension, £15,000 less than the average full-time working woman who takes no time off.
What’s more, the average male worker will save £114,000 during their career towards retirement, around 27% more than their female counterpart.
Which? said the ‘New Parent’ cash injection, coupled with investment growth over time, would help to address this pension gender gap.
How the cash injection scheme would work
Each household would be able to choose which parent or guardian’s pension scheme the contribution is made to.
If no scheme is nominated, the contribution would be put in an account with NEST, the auto-enrolment pension scheme set up by the government.
In addition, Which? proposes that the government raises the minimum auto-enrolment pension contribution from 8 per cent to 12 per cent to boost savings for middle-income earners.
The average earner saving 12 per cent towards retirement could boost their pension pot by £50,000, according to the consumer group.
However, Which? proposes that the default 8 per cent contribution remains for lower earners to avoid over-saving and financial hardship, while others can choose to opt for this lower rate.
Jenny Ross, money editor at Which?, said: “Since its introduction, automatic enrolment has successfully drawn in millions of new savers to workplace pensions, but ‘the motherhood penalty’, which already impacts women’s income, threatens to leave those who choose to work reduced hours due to childcare responsibilities significantly worse off in retirement.
“If the government is committed to pension equality, it should introduce a £2,000 pension contribution for first-time mothers, and also raise the minimum contribution rate for all middle-income earners to ensure they can retire with an adequate pension pot.”