The £65,618 motherhood penalty – and what you can do about it

Mothers face a £65,618 loss in earnings on average over five years after their first child, according to a new study carried out by the Office for National Statistics ONS.

That’s an average fall of 42% or £1,051 per month compared to what they earned a year before the birth.

Further earnings losses of £26,317 and £32,456 were seen over five years after the second and third child, respectively.

The ONS study analysed the earnings and employment of mothers between April 2014 and December 2022.

New mothers faced the largest loss of earnings after the birth of their first child. That’s because they were most likely to take some form of parental leave.

The chart below shows how much a mother’s earnings fall when compared to the year before the birth of a child, the total loss in earnings over five
years.

Why do earnings fall so much?

The data suggests that the impact of moving to part-time employment or changing the type of employment altogether could be the biggest contributing factors to the loss of earnings.

What can you do?

The motherhood earnings loss data is startling. And if you’re concerned about affording parenthood, you’re certainly not alone.

Over a quarter (28%) of mothers often worry about being able to afford meeting their children’s needs, according to a report by the Women’s Budget Group.

Some of the steps to consider to help combat potential earnings loss during motherhood include:

Budget carefully
Making a budget is an essential part of keeping your finances in check, whatever life stage you’re at.

So whether you’ve already started a family or you’re just planning to, it’s important to crunch the figures and get a clear view of what your income and what you’re spending.

Once you understand your current financial commitments, it’s worth making a future budgeting plan which takes into account additional costs you’ll need to cover such as food, clothing and childcare.

A budgeting app can help you automate the process and get started on cutting costs. Some digital bank accounts offer advanced spending insights to help you keep track of your finances too.

If you split your finances with a partner or other people in your household it’s important to regularly check in about your finances to ensure everyone is on the same page about how finances should be managed.

Pay attention to your pension

When you take parental leave, your workplace pension contributions might decrease to match your maternity leave salary. However, your employer still has to make pension contributions matching your pre-leave salary.

Our pension performance calculator can help you see how your retirement savings are doing and whether you might get better returns elsewhere.

Where possible, avoid opting out of your pension to ensure you get this benefit from your employer.

If you’re unsure of anything, try to get professional financial advice.

Your employer might offer free access to legal and financial services which could help you get the guidance you need in planning your financial decisions.

Claim child benefit
Applying for child benefit ensures that you keep building National Insurance Credits which you need to qualify for the State Pension.

Just be aware that if you or your partner earns over £50,0000 you might have to start paying tax on the child benefit payments.

And once your salary hits over £60,000, the tax charge might outweigh any benefit payment received.

It is possible to opt out of receiving the actual child benefit payments when you fill out the form though.

This ensures you still receive the National Insurance Credits towards your state pension without needing to worry about tax.