Personal finance

The motherhood penalty and why female pension savers need to take financial advice now

The UK Government's latest Budget Day statement revealed that a HMRC gaff resulted in over 200,000 women being underpaid on their state pension for years and are now due an average of £13,500 each. Picture by Aaron Chown/PA Wire.

“Everything Fred Astaire did, Ginger Rogers did too. Backwards, and in high heels.”

However, Ginger couldn't have expected to retire as comfortably as Fred.

It's the same over here.

The gender pension gap is a topic we've touched on in the past, but this month again, it has reared its ugly head. Here's why.

(Actually, I feel like saying: “Oh dear, where do we start?”)

It's a combination of factors, but only one conclusion: women saving for retirement need to take some financial advice, and they need to take it now.

First, there are social reasons (which are not the government's fault) and then there is bureaucratic bungling (which is).

The budget was announced on the afternoon of Wednesday March 3, and for financial advisers, this was our annual Harland and Wolff moment.


However, it's totally understandable if you had other things to do that day. We accept that real people actually have a life. So I'll bring you up to date.

The Chancellor's speech on Budget Day usually takes an hour, and only presents the highlights of a budget document that contains many, many things.

If it was an album, it would be called ‘Rishi Sunak's Greatest Hits'.

Each year, in his speech, the Chancellor presents the Government as a kindly benefactor which is making life better for us, and in fairness that's often true. However, he plays down the bits that are hidden in the document – the bad bits.

Among this year's bad bits was the fact that over 200,000 women have been underpaid on their state pension for years and are now due an average of £13,500 each, in a HMRC gaff which even the usually serene former pensions minister Sir Steve Webb called “mind-numbing”.

(I've met the man, and believe me, those are strong words for him.)

Now, put that phone down. No point in ringing us about this. We are not allowed to make enquiries on your behalf.

The Revenue will be sending you a letter if you have been affected. If you have any immediate enquiries you can ring HMRC directly at this number: 0903 704 7044.

So that gets the bureaucratic bungling out of the way.

The social reasons why Ginger would have less of a pension than Fred are summed up in three words: the ‘Motherhood Penalty'.

Mums take career breaks to be at home with our wonderful children, which can be five years away from the workplace and no pension contributions, but doing a brilliant service for society. Nonetheless, it still affects your pension saving.

In addition, in the 1995 Pensions Act the Government said they would be changing the state pension age for women from 60 to 65, bringing it into line with men, from 2010.

Then last October it rose to 66, and it will be rising to 67 between 2026 and 2028, and to 68 after that.

This is because the state pension scheme is very expensive, and due to increasing longevity we are drawing it for longer, so they want to delay when we start drawing it, and also keep us paying taxes and National Insurance contributions for an extra couple of years.

The Office for National Statistics tells us that men actually don't live as long as women. Latest figures for 2019 and published last month tell us that in Northern Ireland, men's average lifespan is 78.8 years and women live to 82.6 years.

(The longest lifespans are in Lisburn and Castlereagh, incidentally. Might be worth moving there.)

With the steadily rising retirement age, this means we can all look forward to being in retirement for 20 years or more.

Even Fred and Ginger wanted to slow down in their later years. Money comes in very handy when you're slowing down.

I'm sure they tap-danced over to their financial advisers to put a bit of planning into that.

Shouldn't you?

Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice Ltd or at

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Personal finance