The recent expansion of the Childcare Act could increase the retirement savings of parents by £1.2bn, with some parents potentially able to retire as much as a year earlier, research from The People's Pension has revealed.

The Childcare Act was originally introduced in 2010 to provide 15 hours of funded childcare per week for three and four year olds.

However, the act was recently expanded to working parents of children from nine months to school age, which is expected to allow an estimated 60,000 parents to re-enter the workforce once fully implemented.

And this could have a knock-on effect for pensions, as The People’s Pension calculated that this increased workforce participation could result in a significant increase in pension contributions.

According to the analysis, at total pension contribution rates of 8 per cent, parents returning to full-time employment could save £333m over the period in which they benefit from additional childcare funding, which could grow to £1.2bn at retirement age.

Furthermore, if contribution rates are increased to 12 per cent, as previously called for by a number of industry organisations, parents could save just shy of £500m into their pensions, estimated to result in around £1.8bn in additional savings at retirement age.

This is not only notable in aggregate, as The People's Pension stressed that the individual impact would also be significant, increasing the pension pot of each individual who returns to work by nearly £20,000, potentially meaning they can retire as much as a year earlier.

The group also pointed out that while the recent expansion of funded childcare is expected to make it more financially viable for parents to return to full-time employment, even those returning on a part-time basis could substantially increase their pension pots.

Indeed, The People’s Pension estimated that workers returning on a part-time basis could contribute an additional £177m to their pensions, resulting in £625m more at retirement.

People's Partnership head of responsible business, Nicola Sinclair, said: “As a nation we are not saving enough for retirement, so it’s encouraging to see that the Childcare Act has the potential to increase workforce participation to a point where it could significantly boost retirement savings across the UK.

"As well as offering much needed support to young families today, the act can empower parents to take proactive steps to strengthen their long-term financial wellbeing.

“Having children is a huge life moment and one with big implications for personal finances, but so is retirement. We are encouraged to see the act has the potential to help with both, immediately and long-term.”

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