Nearly two million single mothers will find it difficult to afford the basic necessities in retirement due to the financial disadvantages they face in their careers.
Women and Retirement report by Scottish Widows
The report, released by Scottish Widows, shows how a “motherhood penalty” will affect three-quarters of unmarried mothers. Statistics show that 46% have had to decrease their working hours to manage either childcare or reduce hours to part-time work by the age of 30, therefore leaving them £47,000 out of their pension pot.
- Over 37% of single mothers have left their jobs to look after children; and
- 48% have said how having children affected their career development.
It’s important to note how the average cost of childcare for those under 2 is £14,000 per year, which could easily be two-thirds of an average yearly salary.
The report suggests that more than half (60%) of divorced women are also not likely to receive a “minimum retirement lifestyle”, which it approximates costs of £12,800 for an individual yearly to spend on food and one holiday. Overall single women will also face a deficit, with 66% not likely to meet this threshold.
According to Scottish Widows, not discussing pension assets when getting a divorce means that 83% of women lose out materially, estimations show it could cost them £77,000 in retirement.
It is argued that in projected retirement income there is a 39% gender gap, with the average woman likely to receive £12,000 per year during retirement as opposed to the average man receiving £19,000.
Statistics show that only 59% of women are on track for a private pension and only half are expected to draw on other savings for their retirement.
However, there are future changes to pension auto-enrolment that predict it could increase women’s future pension pot by £46,000. The changes mean younger people will be able to enrol in a pension earlier than before, changing it from 22 to 18.
Managing Director of Scottish Widows, Jackie Leiper, said:
“Despite how familiar we all are with the gender pension gap issue, the long-term impact on the day-to-day reality for women when they retire is less talked about.
Understandably, single women affected by the motherhood penalty and the cost of solo parenting may be more focused on how to support their family today, but this report shows the struggle they could face by the time they become grandmothers.”
She went onto say how the Government should prioritise affordable childcare so mothers and those who are single could boost their retirement prospects.
It was discovered that 52% of grandmothers and 45% of grandfathers were often looking after their grandchildren for at least one day of the working week.
Some grandmothers have even had to reduce their working hours so they can help with child care.
Head of policy, advocacy and research at the Fawcett Society, Alesha De-Freitas, commented:
“We need urgent childcare reform that prioritises accessibility and affordability for everyone, and this needs to work in tandem with an economy that delivers high quality flexible work.
The fact that we have neither of these benefits means that the current cohort of young mothers will be significantly poorer for the rest of their lives. We cannot afford to burden future generations with the same problems.”
Recommendations
As a result of the report findings, Scottish Widows has made several recommendations to reduce the gender pensions gap, some include:
- Equalise shared parental rights
- Legislate to require pensions to be discussed during divorce proceedings
- Stretch Automatic Enrolment to the self-employed
- Provide better paternity support
- Promote the use of more flexible working arrangements for fathers
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Zoe Till is a Partner and Chartered Financial Planner in our expert Investment Management team. Zoe’s areas of expertise include investment advice, retirement planning, Inheritance Tax and lifetime cash flow modelling.
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