Paying the ‘good daughter penalty’? How to protect your pension

Women in their 40s or 50s who reduce their working hours or take a career break to care for ageing parents - sometimes while also meeting the needs of teenage children - often pay what’s known as ‘the good daughter penalty’ in terms of earnings and pensions.

Caring disproportionately falls on women’s shoulders for a variety of reasons, including societal expectations of women. According to the charity Carers UK, the most recent Office for National Statistics (ONS) census in 2021 revealed that in England and Wales, 59% of unpaid carers are female, with those from the 55-59 age group most likely to provide unpaid care.

This age bracket may coincide with some women’s peak earnings, and workplace pension contributions (both their own and their employers). So, if caregiving means you curtail your hours or take a career break, it can really impact the size of your final pension pot. This can be exacerbated by potentially missing out on bonuses at work – some or all of which might have been paid into your pension - and pay rises if you are on a career hiatus.

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Even for daughters who have a good relationship with parent(s) and are willingly taking on caring responsibilities, the impact on their retirement fund may be substantial, particularly if they are single and/or in lower-paid work.

So, ahead of the UN International Day of Older Persons (1 October), here are some practical tips for alleviating the effects caring might have on your pension.

1) If you aren’t investing already, seriously consider it

It’s important to protect your money from the ravaging effects of inflation and, if you won’t have to call on cash savings for at least five years and have a healthy emergency fund, then investing is worth serious consideration. 

There’s hard data illustrating the case for long-term investing trumping cash savings. Barclays’ Equity-Gilt study 2024, which looks at historical asset class returns since 1899, found that “the probability of UK equities outperforming cash over any two-year period is 70%, and this rises to 91% over any 10-year period”, although, as always, the past is never a guarantee of future returns.

Many investment platforms offer highly diversified, low-cost funds in a range of risk profiles designed to suit people who want to get going. interactive investor, for example, has a Quick-start funds range and a Managed ISA, where experts make the investment choices for you, so this would suit someone seeking a real hands-off approach.

A stocks and shares ISA can be a particularly useful tool in your retirement arsenal. For example, if you want to retire before state pension age (currently 66, but rising to 67 by 2028), you may be able to tide yourself over for a few years with tax-free withdrawals from your ISA alongside income from a private pension until your state pension payments begin. Private pensions are generally accessible from age 55 (rising to 57 from 2028).

It’s important to understand investment risk and to take the appropriate amount to suit you and your circumstances. Investing during caring years can be an opportunity to pursue growth for your own retirement.

2) Top up your own pension while caring

If you have UK earnings in the current tax year – maybe you are working part time – you might also be able to make contributions into your workplace pension or self-invested personal pension (SIPP).

Non-earners can contribute up to £2,880 a year and receive basic-rate tax relief from the government, bringing the total to £3,600 a year. If you are working part time, the total you can contribute per year is up to 100% of earnings, subject to the £60,000 annual allowance rule.

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Your own contributions could help your pension savings grow and benefit from investment growth compounded over time.

3) Ask your spouse/partner to contribute to your SIPP

Not everyone has a partner or one who is in a position to do this, but if it’s a possibility for you, having them contribute to your SIPP can be hugely beneficial, allowing both halves of a couple to build up a healthy pension provision.

In most cases, a partner cannot pay money into an active workplace pension on your behalf, but a third-party can contribute to a SIPP. Their contributions are based on the pension holder’s own earnings, so if you have no earnings, a partner can contribute up to £2,880 a year, topped up by tax relief to £3,600.

However, if you are working part time and contributing, total contributions (from partner, workplace and your own) are capped at 100% of your own earnings or £60,000 per year (the annual allowance), whichever is lower.

4) Consider voluntary NICs contributions for your state pension

Current rules state that you must have 35 qualifying years to receive the full new state pension. You can check your state pension forecast to see if you have any gaps in your record and explore making voluntary contributions (buying extra years) if necessary. You can fill in gaps going back six years. There was an extended window, but that closed in April 2025.

If you care for someone for at least 20 hours a week, you might be able to claim Carer’s Credit, which can help to fill gaps in your state pension/NI record if you are out of the workforce. Eligibility generally depends on the person you care for receiving a disability benefit, so it’s not available to everyone looking after parents - but it’s worth investigating in case it applies in your situation.

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If your caring duties constitute at least 35 hours a week and your parent gets certain benefits, you may also want to look into Carer’s Allowance, a separate benefit including a cash payment.

5) Could consolidation make sense?

If you are comfortable managing your own investments, you might consider consolidating old workplace pensions into a SIPP. As well as having all your pensions in one place, this could potentially reduce charges and give you a wider choice of funds to invest in than what some workplace pension schemes offer.

Some SIPPs charge a percentage-based fee, which means charges rise as your pot grows. However, other SIPPs, including interactive investor’s, charge a flat fee, meaning you pay the same fee no matter how big the pot becomes.

Before you consolidate though, examine whether any of your pensions are defined benefit (also known as DB pensions or final salary) or defined contribution pensions that come with valuable options, such as guaranteed annuity rates. If you have any defined benefit pensions worth £30,000 or more, you are legally required to take regulated financial advice before transferring.

6) Late-career lump sums

If you return to full-time work after a period of caring, you may be able to make a larger lump-sum pension contribution by using carry forward rules. This allows you to take advantage of any unused annual allowance from the previous three tax years once you’ve used up the current tax year’s £60,000 allowance.

Ensure any amount you pay into your pension doesn’t exceed your current tax year’s earnings as tax relief is capped at 100% of your earnings for that year.

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Lump-sum contributions can be a sensible option if you return to a well-paid job, have built up unused allowance while caring and perhaps have an inheritance to fund a contribution.

Be aware that the tapered annual allowance for high earners (over £260,000) could mean you have a reduced annual allowance for carry forward years. The gov.uk website has more information on this.

7) Catch-up contributions

Another option for those returning to the workforce or increasing their hours after a period of caring is to substantially boost your monthly contributions to bolster retirement savings.

As well as benefiting from tax relief on these contributions, late-career injections of cash into your pension may be able to reduce your taxable income, depending on how contributions are made, which could be useful if you are in a higher tax band.