Childcare breaks cut pension pots by £70,000

A WOMAN could wipe as much as £70,000 off her pension pot by taking a career break to have a baby, research has found.

One-quarter of women (25%) plan to take time out of their job at some point, with the main reason being to start a family, a study conducted by Duncan Lawrie Private Bank found.

But based on average salaries, taking a five-year break during a 40-year career could cause a woman’s eventual pension fund to shrink by £70,000, the study found.

One-fifth of the women who were planning to take a career break admitted they had “no idea” how they were going to fund their time away fromwork.

The figures are based on a woman starting paying into a pension fund at the age of 25, and contributing 5% of her salary to a retirement fund each year.

Her starting salary would be £25,000, which would gradually increase over time.

After taking a career break aged in her early 30s, the woman would re-start her career on the same wage.

The survey of more than 2000 people also found that about 13% of men were planning to take – or are currently taking – a career break.

However, of these, more than half (53%) had already started setting money aside to cover the costs.

The main reason given for men taking time out was to travel or live abroad.

Richard Boyd, a chartered financial planner at the bank said: “For some, a pension might be one spinning plate too many to manage, but its importance cannot be underestimated.

“Those that do let the plate fall may live to regret their decision later down the line.”