Three-quarters of the UK’s circa 2.5m single mothers might not be able to afford food and heating when they retire, as a result of the motherhood penalty, new research has found. The provider is calling for childcare reforms and the introduction of a ‘family pension’. 

 

The annual ‘Women & Retirement Report’ by provider Scottish Widows, published on Wednesday, has found the majority of single mothers face living in poverty when they retire, based on the Pensions and Lifetime Savings Association’s Retirement Living Standards. 
 

The average woman is on track to receive £12,000 a year in retirement after paying for housing expenses, £7,000 short of the £19,000 income for the average man, in today’s money. Childcare is a key driver behind the gender pensions gap of 39%, the report says, along with a lack of awareness about pensions in divorce proceedings, as 60% of divorced women did not discuss pensions during the split. 

 

Professional childcare for one child costs more than £14,000 a year, making up 64% of the average wage, which could explain why most parents do not resort to it. The government has plans to extend the 30 free hours childcare support to all working parents of children under five by September 2025, but currently, only parents of three and four-year-olds can receive it. The 30 hours are term-time only, covering 38 weeks in the year, which is out of sync with most jobs. In practice, government support is therefore spread over 52 weeks by many providers. 

 

More than a third of mothers (37%) leave jobs to look after their children, while nearly half (48%) say that having children slowed their career progression and 51% of single mothers struggle to find jobs in the first place, the report also shows.  

 

Childcare limits how much time women can spend in paid work over their lifetime, and while half of fathers say they share childcare equally with their partners, only 31% of mothers think the same. 

 

A permanent move to part-time work comes with a pensions penalty. Doing so at age 30 can cost women £47,000 in their pension pot, according to Scottish Widows, noting that 46% of single mothers reduce their hours to manage childcare. 
 

“We must recognise the amount of childcare responsibility that falls on single mothers and their huge contribution to society, which means they should be protected by policies to limit the impact it has on their careers and pensions,” said Jackie Leiper, managing director at Scottish Widows. “The government needs to prioritise affordable childcare to improve the retirement prospects for all mothers and single mothers in particular.”  

  

Alesha De-Freitas, head of policy, advocacy and research at women’s rights charity the Fawcett Society, agreed: “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.” 

 

As well as childcare reforms, Scottish Widows is calling for a family pension, shared between a couple. It argues that this would address not only the impact of childcare on women’s earning power and pensions, but also the risk of losing out during divorce or from men buying single life annuities with their generally larger pot and not making provisions for their partner, who often survives them. 

 

The Pensions Policy Institute has explored the impact of some potential policy solutions. Similar to a family pension, it looked at household pension pots where partners have equal ownership and will share details about this in an upcoming briefing note. The institute also explored options such as employer-only contributions for low earners – women are more likely to be among these – and a pensions top-up for family carers to mitigate time spent out of employment or working part-time for caring. 

 

“These policies have potential to narrow the gender pension gap, but come with some trade-offs, in particular for the first two policy options, significant cost for government and/or employers,” said Lauren Wilkinson, senior policy researcher at the Pensions Policy Institute. 

 

Ultimately however, because labour market inequalities are driving the gender pensions gap, solutions need to be joined up and look beyond the pensions industry, she said, noting that future research might include looking at the gender pensions gap in other countries. 

 

“We could also benefit from further research into the decision-making process around gendered divisions of domestic labour, in order to understand how societal expectations of gender norms feed into these labour market inequalities,” Wilkinson believes. 

 

PPI’s research has for example shown that even in couples where the mother earns more than her male partner, there is still a greater prevalence of women taking time out of employment or reducing hours in the years after a child’s arrival, “suggesting this is not a purely financial decision”, she remarked. 

 

According to the PPI, the gender pensions gap starts to widen from about age 25 but the motherhood penalty really bites from age 40 onwards, when the effects of time taken out of the labour market for childcare begin to materialise upon return to work. 

 

“In contrast, there is something of a fatherhood bonus, with men in couples with children having higher than average labour market attachment, with both higher employment rates and higher levels of pay on average,” said Wilkinson.  

 

When adjusted to account for part-time hours, the labour market participation rate is 85% for men in couples with children – which is higher than the population average for men, the PPI found. Women with children have significantly lower rates of labour market participation, around a quarter for single mothers and 40% for women in couples with children. 

 

Is there anything in the design of UK pensions that drives the gender pensions gap, and how could it be changed?