DWP £138K warning to parents caring for disabled children

Parents caring for disabled children are being urged to review their retirement funds. New data indicates parents who leave work to care for their children may be up to £138,000 worse off in later life compared with average workers.

This is because they are not contributing to a workplace pension. It means they also do not benefit from employer contributions or the growth of their pot of cash through investment returns.

According to pension provider People's Partnership found, about 6.7million people across the UK could be affected. About two thirds (64 per cent) of parents of disabled children are said to be worried about their future cash pot.

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It is now calling on bosses to give parents more flexibility so they can balance their career with caring responsibilities, The Sun reports. Allowing parents to work part-time could make a difference to their pension pot.

Parents who return to work part-time are typically £49,000 better off than those who do not work at all, The People's Partnership said. But these parents are still £89,000 worse off than parents who work full-time hours.

Parents who return to work full-time benefit the most. Those who take a career break to care for their disabled child, but eventually 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."

When you start a new job, you are usually automatically enrolled into a form's workplace pension scheme. It means you contribute some of your salary each month to your pension, while your employer also contributes a percentage.

If you do not join a workplace pension scheme or opt out of your company's scheme, you cannot benefit from the extra cash from your employer. The minimum contribution is 5 per cent for employees and 3 per cent for employers - but some bosses increase contributions if their worker increases theirs.

Money in your pension is invested on your behalf, with the aim of growing the pot over time - giving you even more free cash. Research from 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 do not 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, a parent of disabled children could lose over on average nine years' worth of retirement savings.

If you are unable to return to work full-time, there are other ways to build extra pension savings. You can open a personal pension and contribute a small amount every month.

The pension provider will invest it on your behalf. If you are caring for a child, you should claim National Insurance credits through your child benefit form to ensure you receive the maximum state pension in retirement.

Taking time out of work can leave gaps in your National Insurance record, which can reduce your state pension. But you can claim credits to fill these gaps.

Nicola Sinclair, head of responsible business at People’s Partnership, said: "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."