Millions of parents are missing out on free pension cash worth up to £720 a year. New research from Octopus Money reveals almost two thirds of parents (63%) 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%.
For families taking time out of work to raise children, partners can invest up to £2,880 a year in contributions that can attract an extra £720 from HMRC – effectively free money for the future. Over 30 years, that £720 annual top-up could grow to more than £3,000 through compound interest returns.
The findings come from a nationally representative survey of 1,000 parents, commissioned by Octopus Money, which reveals how family priorities can ultimately widen the pension gap. Despite being established over 25 years ago under Tony Blair’s 2001 Finance Act, the majority of parents (63%) have never heard of this policy. Nearly two-thirds (65%) say they would have used the rule if they had known about it.
Based on official ONS data, Octopus Money estimates that UK families who missed the opportunity could have lost out on a total of £2.5 billion in pension top-ups while they took parental leave, if they were non-earning.
Closing the Parenthood Pension Gap
Greater uptake of the policy by partners could also help plug the ‘pension gap’ between men and women, particularly as significantly more women take parental leave and career breaks than men each year:
- 42% of women say they are not confident they will have enough in their pension to live comfortably in retirement, compared to just over a quarter of men (28%)
- Worryingly, over a third (34%) of parents reduced, paused or stopped their contributions to their pension during their parental leave and 1 in 6 even stopped their contributions altogether
- Over half (52%) of parents said becoming a parent hit their finances harder than expected
- While many assume childcare costs are the main concern, parents say their biggest financial worry is saving for their children’s future (45%), followed by day-to-day living costs (42%)
Among 13,000 customers signed up with Octopus Money, the pension gap between men and women widens sharply with age. Women in their early 20s start out slightly ahead, but by their mid-20s men have overtaken them. By age 55 to 60, men have around 40% more in their pension pots than women – illustrating that a pause in contributions when starting a family can snowball and have a real impact on your finances in later life.
Octopus Money is urging families to ‘Close the Parenthood Pension Gap’ – by looking after their own long-term finances as well as their children’s. To help, Octopus Money has created a calculator tool that shows how much parental leave could impact your pension – and how a few smart moves today could help you close that gap before it grows. Try it for yourself here.
Ruth Handcock, CEO of Octopus Money says: “I can’t shout about this policy enough. As a working parent who has experienced parental leave twice, I empathise with those families who want to celebrate the joy of having children without compromising on their financial security for later life. And it’s not just new parents: our coaches regularly hear from parents who say they wish they’d thought about pensions and parental leave earlier.
“That’s why we’re so focused on shining a light on these little-known rules: because the earlier you know, the bigger the difference it can make. I strongly urge all new parents to think about financial planning in parallel with family planning – to futureproof the whole family, not just the newest member.”
Michelle Kennedy, CEO of Peanut, an app connecting women through all stages of motherhood, spoke to Octopus Money on its Keep the Change podcast: “I really feel strongly that when we do not understand our own financial position and ability to plan, it stymies us. It prevents growth. So, anything that empowers women in particular to understand their own personal finances, to invest in themselves and therefore invest in planning should be celebrated very, very loudly,” she said.
“It is so important to understand what you can do, what you’re entitled to, what everything means, how things work, your contributions. Should you be making the max of your contribution? You bet your life you should be. So all of these things are so fundamental. If you are someone who likes to feel empowered in any other element of their life, please let it also be with your own personal finances.”
Case study: Ekaterina, 33, Product Manager
Ekaterina, 33, received advice from Octopus Money whilst preparing to take maternity leave, after she realised the long-term impact it could have on her pension. With support from Octopus Money, she learned how to plan proactively for her family’s future while maintaining her own financial security.
“I hadn’t really thought about how taking parental leave would affect my pension, not until quite late into my leave. Before maternity, my focus was on short-term things like setting up the nursery and budgeting for time off, not the long-term impact on my pension or future wealth. My employer gave clear information on maternity benefits and access to Octopus Money, which helped me understand how even a short break can affect future contributions. It also introduced me to the pension gap, something I’d never really considered before.
“I didn’t know this government pension rule exists and I think that’s the same for a lot of other parents. It’s a missed opportunity to keep long-term finances on track during a period when many of us are focused on day-to-day stability. My husband and I are quite open about money, and if we had known that this was an option, we would definitely have done it. It’s such a practical way to balance financial gaps that can otherwise quietly grow over time.
“Working with Octopus Money completely changed how we think about money as a couple. Instead of just focusing on short-term costs like childcare, we’ve started planning for long-term pensions, savings, and investments. Having an expert involved made those conversations easier and less emotional. Looking back, I wish I’d started investing earlier and paid closer attention to workplace pension policies, but I’ve learned that financial planning after having a child isn’t just about money, it’s about creating peace of mind and flexibility for the future.”
ENDS
Notes to editors
1 – Nationally representative survey of 1,000 parents commissioned by Octopus Money and conducted by Opinium between 20th-24th October 2025.
2 – Based on conservative average annualised UK pension fund returns of 5%, as reported by PensionBee (2024).
3 – Maximum potential contribution from HMRC if families unaware of the scheme had paid in the max £3,600 gross during a parent’s unpaid parental leave. No. of families based on ONS data: ‘Families and households in the UK: 2024.
4 – HMRC data obtained by FOI by The Dad Shift (The Independent).
5 – Octopus Money aggregated customer data collected over the last 12 months, based on 13,387 customers. Note that this data is not nationally representative. Full data:
| Age | 18-25 | 25-30 | 30-35 | 35-40 | 40-45 | 45-50 | 50-55 | 55-60 |
| Pension gap (male vs female, based on median pension for 5-year age groups) | -9% | 6% | 10% | 12% | 27% | 27% | 35% | 40% |
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