Millions of unpaid carers face a hidden retirement penalty of up to £30,000 because of the sacrifices they make to look after sick, disabled or elderly relatives.

The financial hit can come years after caring responsibilities have ended - when people finally discover that their pension savings have fallen badly behind. Research from pension firm PensionBee suggests every year spent out of paid work caring for someone can knock around £5,000 off retirement savings. This means someone who has several periods of unpaid caring during their working life could reach retirement with £30,000 less than someone who stays continuously in employment.

It is a stark warning about the long-term cost of caring for family members. And it comes as the Government faces continuing anger over the Carer’s Allowance scandal, which has seen thousands of carers hit with demands to repay benefits.

Some were found to have breached the earnings limit by only relatively small amounts, but faced potentially huge bills because of the benefit's rigid ‘cliff edge’ rules.

Others were not told about overpayments for years, allowing debts to build before they were finally contacted. The Government has promised to review cases affected by the scandal.

But the immediate problems surrounding Carer’s Allowance are only part of the financial burden facing unpaid carers. PensionBee's research highlights how caring can inflict a second, hidden penalty - on retirement income.

People who leave employment to care stop making pension contributions and lose the opportunity to build up valuable workplace pension benefits. Those who remain in work may still be forced to cut their hours, turn down promotions or move into less demanding jobs.

That can leave them earning less and paying less into their pension for years. The potential scale of the problem is enormous.

PensionBee estimates that two-thirds of people will provide unpaid care at some point during their lives. So this is not simply a problem affecting a small group of families.

It is a financial risk that could eventually confront millions of people. Lisa Picardo, Chief Business Officer UK at PensionBee, said: “For many unpaid carers, the financial impact doesn't end when their caring responsibilities do. Years spent reducing paid hours, turning down promotions or leaving the workforce altogether can translate into significantly lower pension savings and greater retirement insecurity.”

The issue has also been highlighted by the Second Pensions Commission, which has identified unpaid carers as being at heightened risk of undersaving for retirement.

Its final report, expected in 2027, is due to make recommendations to the Government on how these structural problems can be tackled.

Ms Picardo said: “While the focus has rightly been on the immediate consequences of the Carer's Allowance scandal, there is also a longer-term issue that receives far less attention, which is the retirement penalty many carers pay for supporting their families. Without action, millions risk reaching later life with pension savings that fail to reflect the vital role they have played in society.”

The £30,000 figure is an illustrative estimate, rather than a prediction of what every unpaid carer will lose.

But it highlights an uncomfortable reality. For many people, caring for a loved one can mean sacrificing earnings and career opportunities today – while also sacrificing thousands of pounds of financial security in old age.

And unlike a Carer’s Allowance overpayment, this is a penalty that may only become obvious decades later, when it is too late to easily make up the shortfall.