Taking 10 years out of work to raise a child could mean losing around a third of a private pension, the equivalent of about £2,500 a year, according to Canada Life.

The life insurer has calculated that someone aged 25 on a salary of £30,000 would lose out on £2,546 each year if they were to take 10 years out of work in order to look after a child. Parents aged 30 would lose out on £2,257, and those aged 35 would give up £2,001 from their pensions.

Canada Life has also warned that young people taking career breaks to travel or volunteer abroad are also set to forego larger chunks of their pension income.

A 25-year-old on an average salary would miss out on £800 a year in retirement after taking three years off, or around 10 per cent of their monthly private pension. Under the same circumstances a 55 year old would only lose around £400 a year, as the money they would have saved earlier in life would have had more time to grow as an investment.

In order to make up for the lost pension, Canada Life says that someone could work for roughly the same amount of years as they’ve taken off. Alternatively, they could increase their contributions when returning to the workplace. Someone aged 25 who has taken 10 years off to raise children would need to increase their contribution from to 19 per cent for the rest of their working life to get back to the same financial footing.

To receive the same income as if they hadn’t taken a 10 year gap, they could also choose to take no tax-free cash lump sum. This amount falls from 25 per cent to 0 per cent for someone taking 10 years out without increasing their contributions.

Canada Life technical director Andrew Tully said that if at all possible, the best strategy to make up the shortfall would be to continue making contributions to a pension scheme during any breaks from work. He said that as women are still doing the majority of child-rearing, they are paying a “big price” when it comes to financial security later in life.

He pointed out however, that women can also help ensure they receive more of the full state pension by claiming National Insurance credits while off work. “One area of confusion with the state pension and NI credits is the area of claiming child benefit,” he explained. “If [a] partner is earning over £50,000 most women won’t claim a child tax credit because they wouldn’t get the benefit. However, it’s vital to make that claim, as they will still receive NI credits which count towards the state pension.”

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