\n\t\t\t\t\tFamilies could have collectively missed out on as much as \u00a32.5bn in pension top-ups during periods of parental leave, research shows\t\t\t\t\t <\/p>\n
Parents taking time off to look after their children could boost their pension pot by \u00a3720 a year by utilising a little known rule, experts have said. <\/p>\n
A long-standing rule allows partners or relatives to pay up to \u00a32,880 a year into the pension<\/a> of someone who is not earning while looking after children.<\/p>\n HMRC automatically tops up that contribution by 25 per cent, handing families an additional \u00a3720 for the future.<\/p>\n New FeatureIn ShortQuick Stories. Same trusted journalism.<\/p>\n How does the top-up work?<\/p>\n Pension contributions automatically receive tax relief at the 20 per cent basic rate, which means for every \u00a380 contributed, the Government adds \u00a320, resulting in a total contribution of \u00a3100 \u2013 a 25 per cent boost on the amount paid in.<\/p>\n Every tax year, you can usually get tax relief on pension contributions up to 100 per cent of your earnings or \u00a360,000 \u2013 whichever is lower.<\/p>\n If you earn less than \u00a33,600 a year, you can get tax relief up to this amount of pension savings each tax year until you are 75 \u2013 this is equivalent to \u00a32,880 of your money and \u00a3720 in tax relief.<\/p>\n This applies even if you are saving into someone else\u2019s pension \u2013 for example, a working parent into a non-working parent\u2019s pot \u2013 up to the \u00a33,600 limit. The working parent\u2019s own pension allowance is separate to the non-working parent\u2019s pension.<\/p>\n According to the Office for National Statistics (ONS), the average age of a female parent is 31 years old, with the average age for state pension retirement being 66 years old. <\/p>\n Taking into consideration the 5 per cent UK pension return, the \u00a3720 figures would grow to approximately \u00a33,970 over 35 years, whilst factoring in compound interest.<\/p>\n Experts say parents are unaware of benefit<\/p>\n Financial planners at Octopus Money, who carried out the research, say the benefit is often overlooked despite being available for more than two decades, and the top up can grow substantially over time through compound interest.<\/p>\n New polling from the firm shows that almost two thirds of the 1,000 parents surveyed<\/a> said they had never heard of the rule. Many said they would have used it had they known earlier.<\/p>\n Estimates based on official population data indicate that families could have collectively missed out on as much as \u00a32.5bn in pension top ups during periods of parental leave.<\/p>\n The lack of awareness comes at a time when parents report mounting financial strain. Almost half say day-to-day living costs<\/a> are their biggest pressure, and more than half say becoming a parent hit their finances harder than expected.<\/p>\n A third reduced or paused their own pension contributions during parental leave and one in six stopped altogether, the research found.<\/p>\n The consequences are felt most sharply by women, who take the majority of career breaks to raise children.<\/p>\n Confidence in future retirement income remains low among women, with more than four in 10 saying they are not sure they will have enough to live on comfortably.<\/p>\n