Did you know that a woman in the UK has to work an extra 19 years on average to get the same pension outcome as a man? Every time I quote that statistic people are shocked, yet this issue has been documented for years. The real shock is that progress has barely shifted.
The uncomfortable truth is that the gender pension gap is caused to some degree by parenthood, which carries a hidden financial penalty that beds in within a few short years and can take decades to undo.
The moment at which parents - and most often, women - step away from work to have children, their long-term financial security quietly erodes. As a working parent who has taken parental leave twice, I know how your own financial future can slip down the list of family priorities.
In parallel, the non-birthing parent often reports feeling trapped - taking on the entire responsibility for the family finances.
Balance is critical, and we don’t need to continue this status quo. With better financial education and practical guidance, people - particularly women - can make informed choices that protect their long-term finances and, crucially, prevent the pension gap from widening.
The pension rule every parent should know
Our research shows that millions of parents are missing out on free pension cash worth up to £720 a year, because they are unaware of a rule that allows a partner or relative to pay into a new parent’s pension, with the government automatically topping it up by 25%. Greater uptake of the policy could help plug the pension gap between men and women and leave families overall better off.
The effects show up starkly in our own data. Among our 13,000 customers, the gender pension gap rises sharply with age. Women in their early twenties start out slightly ahead, but by their mid-twenties men have overtaken and by 55 to 60, men have around 40% more in their pension pots. What feels like a small pause during parental leave becomes an invisible bill that surfaces decades later.
Worryingly, our research found that over a third of parents reduced or paused their pension contributions during their parental leave - and one in six stopped their contributions altogether. These choices are understandable in the moment but carry outsized consequences that fall disproportionately on mothers. This is not a story of mums versus dads. It exposes a deeper structural flaw in how we expect families to hold their financial lives together while raising children.
No-one needs more pension product information
While the gender pension gap is a stark illustration of the parenthood penalty, the solution isn’t just talking more about pensions. That’d be like expecting people to get fitter by talking about weight machines.
Our research shows that the real issue is a lack of financial preparation and accessible guidance. We all know the feeling of walking into a gym and having no idea what all the
machines do. Well the same is true with money. We need someone to help us make sense of it all and build a plan.
More than half of parents didn’t consider the impact parental leave would have on their pension and one in five didn’t make any financial plan before going on leave.
What’s more concerning is that fewer than a quarter of parents received any financial guidance or education from their employer before stepping away from work. Pensions are something most people engage with mainly through the workplace. This is a critical moment where employers could reshape confidence but are largely absent.
This is not about apathy. We hear frequently from parents who wish they had understood the implications earlier, but didn’t know where to turn.
Employers can make a transformative difference - and it pays back for them
Financial planning doesn’t just improve the health of parents’ workplace pensions - it builds a critical muscle and strengthens their overall financial future and resilience. Our research found that among those who made a financial plan ahead of stepping away, over a third felt more committed to their employer afterwards and more confident about their long-term retirement prospects.
For employers, this should be a wake-up call. Financial stress doesn’t stay at home - it affects confidence, wellbeing and performance. Employers who provide clarity and support at pivotal life moments build trust, loyalty and stronger returns to work. Offering financial guidance isn’t just compassionate, it’s commercially smart.
It’s time for employers to step up
Parental leave policies have improved. But financial guidance remains the missing piece. Too many employees are in the dark about their pensions: who manages them, how many pots they have, what their employer contributes and what they themselves need to maintain the life they expect later on. Educating employees on this is a responsibility. It should be treated as a duty of care, not an optional extra.
If we are serious about closing the Parenthood Pension Gap, access to financial guidance and planning must become a core part of parental support packages. Employers should help parents think about financial planning in parallel with family planning, because the earlier you build a plan, the bigger the difference it can make.
Ruth Handcock is CEO, Octopus Money
