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Planning a pension – a mother’s view


I’m not much of a gambler, but I’m willing to bet that when you found out that you were pregnant, the last thing that crossed your mind was how having a child would affect your pension.

Who can blame you? If you were anything like me, you were too busy running out and buying pregnancy tests, then waiting for the first scan, your due date and once the baby arrived, maternity leave flying by in a haze of sleep deprivation, nappy changes and the best days of your life.

By the time you have to think about returning to work, childcare becomes your main concern – inconveniently right around the same time you start shelling out on Clarks shoes – so it is not surprising that squirreling away money for old age just isn’t on the radars of most new working mothers.

The gender pay gap and the double whammy of maternity leave career breaks and reduced hours due to childcare means achieving a comfortable retirement has always been harder for women. According to the Pensions Advisory Service, two-thirds (69%) of women between the ages of 65–69 receive less than the full basic state pension, compared to about one in seven (15%) men.

But to make matters worse, if you are a member of your company pension scheme, not only will going part time mean a smaller pay cheque, you will also be contributing less each month – as will your employer – meaning you are taking a bigger financial hit than you may realise.

Going it alone

According to the Office of National Statistics, the number of women in self-employment is increasing at a faster rate than the number of men, with a growing number of mothers transitioning to self-employment when their maternity leave comes to an end. A fifth (21%) of women cite family commitments as a reason for becoming self-employed, against just 2% of men, and I’m one of them.

Before I had my daughter, I worked as a financial journalist on a national newspaper. I loved my job, but worked very long hours and spent a small fortune on commuting from Sussex to the office in London each day.

When I became pregnant, I knew I didn’t want full-time hours after maternity leave. But once train travel and childcare costs were factored in, it just didn’t make financial sense to return to my old job. Fortunately, journalism lends itself quite well to working freelance and I now work from home and have the flexibility to schedule my hours around my daughter.

But what does this have to do with your pension – or mine for that matter?

Whether you work for yourself, own your own business, are a subcontractor or a freelancer, saving into a pension can be more difficult than it is for people in employment. Irregular income patterns can make regular saving difficult, and while it might be great to be your own boss, you will have to make up for those lost employer contributions.

Save what you can

The good news is that you will still see your contributions topped up by income tax relief from HM Revenue & Customs (HMRC). If you’re a basic-rate taxpayer, for instance, for every £80 you pay into your pension, HMRC will add an extra £20.

Whether you work for yourself or for a company, saving enough for a decent pension is pretty simple: you have to try to save as much as you can – and it pays to get cracking. The effect of compound interest means it is a good idea to not to wait too long to start.

But how much is enough? According to Hargreaves Lansdown, an advisory firm, a good rule of thumb should be to save a proportion of our salary equal to half our age at the time of starting a pension. In other words, if you start at 30, you should put in 15% of your salary throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.

But bear in mind that this does not take career breaks into account, so women should aim to boost this sum by maintaining pension contributions even when not working.

No one likes to think about getting old, but there is no way to avoid it and we mothers can all agree that the idea of spending our retirement on the breadline is not ideal. It’s time we make our retirement one of our family’s financial priorities. Trust me - you will be glad you did.

This article has been commissioned by retiresavvy and any opinions voiced are the author's own.

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