Those approaching retirement are being urged to check how much their pension is worth as they could get less than expected. Unpaid carers are more at risk of having less to spend in their retirement due to being out of the workforce for periods of time. While this group can apply for benefits such as Carer’s Allowance, their pension pots could be worth £33,000 less than their non-carer counterparts.
State pension entitlement is based on National Insurance contributions, which are gained through working, and many employees have a workplace pension.
If someone is an unpaid carer, they are unlikely to make up the time for these lost contributions and may not have a workplace pension to pay into.
Around three million women and two million men in England and Wales are unpaid carers, according to data from the Office for National Statistics (ONS).
This is the equivalent of 9.7 percent of the usual resident population with the highest percentage of unpaid carers being those aged between 55 and 59 for females and between 60 and 64 years-old for men.
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Some 19.9 percent of women aged 55 to 59 provide unpaid care, with females in every age demographic more likely to provide unpaid care up to the 75 to 79 age group.
However, from the age of 80 onwards, men are more likely to provide care with the highest percentage of Britons being unpaid carers in poorer areas.
PensionBee, one of the UK’s largest pension providers, is sounding the alarm over the lost private pension contributions for unpaid carers.
Notably, the provider is warning that for a woman aged 55 on a typical salary who gives up full time work to become an unpaid carer, their pension pot is around £33,000 lower when she reaches the state pension age.
As it stands, people are allowed to claim their state pension once they turn 66 however this changes every couple of years.
To get their full entitlement, pensioners typically need to have 35 years of National Insurance contributions under their belt for the full new state pension and 30 years for the full basic state pension.
Becky O’Connor, the director of Public Affairs at PensionBee, addressed the discrepancy between the pension pots of carers and those who do not have caring responsibilities.
She explained: “Unpaid carers make huge personal sacrifices on many levels. One of these sacrifices is their pension provision. The impact on pension pot sizes and quality of life in retirement for unpaid carers, is significant.
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“Taking time out of paid work to perform unpaid care results in an inability to earn as much, if anything, through paid work. This in turn makes it harder to continue to build up a big enough pension pot to retire.
“People in this situation are likely to have less private pension provision – and if they are giving up work earlier than planned, it might have to last them longer, too. This issue disproportionately affects women, as the ONS data suggests.”
The retirement expert noted that the age demographics which have the highest number of unpaid carers are those between the current state pension age and the normal minimum pension age, which is 55.
As a result, it is more likely that people will consider giving up work to care for someone in need the closer they get to reaching retirement.
This will create pressure on people to use their private pension savings for income earlier than they would have liked with individuals having a smaller pension pot than initially envisioned.
With this in mind, the PensionBee director is encouraging unpaid carers to take advantage of the wealth of benefit support that is available to them in order to boost their income.
Ms O’Conner added: “Carers who look after someone for more than 20 hours a week can get Carer’s Credit, so they at least don’t have to miss out on National Insurance contributions as a result of giving up work and can continue to look forward to the state pension.
“Unpaid carers could also be eligible for the Carer’s Element of Universal Credit, worth £69.70 a week.
“However these entitlements do not make up for the lost ability to make private pension provision.
“The retirement living standards from the Pensions and Lifetime Savings Association indicate that people need more than the state pension can provide for a basic living standard in retirement. The years lost to caring can cost people dearly later on.”