Having a family doesn’t just stretch your monthly budget. It can reshape your long-term finances in ways most parents never see coming.

This is the parenthood penalty. And it’s hitting families harder than ever.

Our latest Keep the Change episode digs into the real financial impact of parental leave, childcare and career breaks. It also highlights one pension rule almost no one knows about, yet could be worth £720 a year in free government cash.

Listen to the episode

Tom Francis speaks to Octopus Money CEO Ruth Handcock and parenting app Peanut founder Michelle Kennedy about the parenthood penalty and the simple moves that can protect your future finances:

Most parents are missing out on free pension money

New research from Octopus Money shows nearly two thirds of parents don’t know about a pension rule that lets a partner or relative pay into their pension while they take time out of work.

If you’re not earning during parental leave, someone else can contribute up to £2,880 a year into your pension on your behalf.
HMRC then tops it up by 25%.

That’s £720 in free money, every year. Over 30 years, that annual top-up could grow to more than £3,000 through compounding.

Yet 63% of parents have never heard of it. Based on ONS data, families could have missed out on an estimated £2.5 billion in pension top-ups since the policy was introduced.

The Parenthood Penalty hits pensions the hardest

The income impact of becoming a parent is already clear. But the pension impact is even more brutal.

“We obsess about the first year of a child’s life, but the financial impact lasts decades.” – Ruth

Our research found:

• 42% of women are not confident they’ll have enough to retire comfortably
• Over a third of parents reduce or pause contributions during parental leave
• One in six stop their pension contributions altogether
• Half of parents say the financial impact of parenthood hit them harder than expected

Among 13,000 Octopus Money customers, the pension gap widens rapidly with age. Women in their early 20s start ahead. By their mid-20s, men have overtaken them. By 55 to 60, men have 40% more in their pension pots.

A short pause in contributions can snowball into a long-term gap.

Why financial planning matters so much

When life feels chaotic, your finances can be the one area you can take control of. Planning early can make a real difference.

Ask yourself:

• What parental leave do we each get, and how will that affect our income?
• How will we handle pensions while one of us isn’t earning?
• Are we making the most of the government top-up?
• What childcare support are we eligible for?
• How do we balance short-term costs with long-term security?

For many parents, these questions simply never get asked. Our survey found that saving for children’s future is their top financial worry, followed by day-to-day living costs. Long-term planning falls to the bottom of the list.

“Ask the questions. Even the ones you think you ‘should’ know. That’s how you take your power back.” – Michelle

Close the Parenthood Pension Gap

Parents shouldn’t have to choose between enjoying the early years and protecting their financial future.

To help, we’ve built a simple tool so you can see how parental leave could affect your pension – and what to do about it.

👉 Try the Parenthood Pension Gap tool

Important information

This article and podcast are for general information only. They are not personal advice. Your financial decisions should be based on your own circumstances. Investments can go down as well as up. Pension and tax rules can change.