Question

Question 2

Pat and Sam are a couple with two young children, Cassandra, aged 3, and Clairvoyance, aged 1. They live in Liverpool. Until now, both have been able to continue with their full-time jobs, because Sam’s mother, Emily, could look after both children during the day. (Because both Pat and Sam are in paid employment, Cassandra is entitled to 30 hours of free childcare during term time which she was using).

However, Emily’s health has rapidly but temporarily deteriorated and she needs care herself for the time being so she’s no longer able to provide it for her grandchildren when needed. Pat and Sam are weighing up options as they have secured a nursery place for Clairvoyance either part-time or full-time should they choose to use it.

2.1  Briefly explain two factors that could disproportionately affect Sam’s lifetime financial well-being if she were to give up her full-time job to look after the children until they are in school.

Answer 1

The three factors that could disproportionately affect Sam’s lifetime financial well-being if she were to give up her full-time job to look after the children until they are in school.

1. Savings from Income/Salary - If we consider Sam’s age to be in the mid 30s, she could work for another 25 years. Also, she would be leaving her job till her children are in school, she could be loosing around 10 years of savings and the interest income on it. And considering the impact on it till her retirement, this is huge sum of money.
2. Post Retirement Benefits - The general formula to come up with post-retirement monthly benefits has a parameter which includes no of years in service. This step of her will reduce the no of years by 10 years and considering that she has 25 more years till retirement of which only 15 will be counted, her post-retirement benefits will reduce drastically.
3. Losing 30hrs of childcare for Clairvoyance- The rule says - “Both parents must be working or the sole parent must be working in a lone-parent family” if they meet the earnings threshold. In case Sam leaves her job, they would lose the 30hr of childcare when Clairvoyance will turn 3 and 4. This will cost thousands of pounds to the family in the upcoming 2 years.