New findings shed light on the challenges faced by single mothers in building adequate pension savings, as research by NOW: Pensions and the Pensions Policy Institute (PPI) exposes significant disparities in earnings and retirement provisions.
According to the data, single mothers earn 53% less than the ‘average’ man and 37% less than the ‘average’ woman, underscoring the financial hurdles they encounter.
This stark contrast in earnings not only impacts their immediate financial well-being but also jeopardises their long-term security in retirement.
The gender disparity in pension savings is glaring, with women retiring on average with a pension pot of £69,000, compared to £205,000 for men. The discrepancy arises from various factors, including prolonged absences from the workforce to raise families or undertake caring responsibilities, resulting in an average loss of £39,000 in pension savings.
Furthermore, the inability of single mothers to access workplace pensions under current auto-enrolment rules exacerbates the situation. Despite being in employment, one in three working single mothers are ineligible for a workplace pension, amounting to over £852 million in missed pension contributions since 2012.
The prevalence of part-time employment among single mothers, standing at 54% compared to the national average of 21%, further compounds the issue. Many fall short of the eligibility criteria for pension saving, which triggers only upon earning £10,000 in a single role, depriving them of crucial employer contributions and tax relief.
Lizzy Holliday, Director of Policy and Public Affairs at NOW: Pensions, highlights the urgent need for policy reforms to address these disparities. She highlights the importance of affordable childcare in enabling more mothers to make informed choices about their careers and retirement planning. “Since it was introduced, auto-enrolment has transformed how millions of people in the UK save for their pension. Yet for far too many in our society, saving an adequate amount in a pension remains out of reach,” she said.
“Data shows the current system has a disproportionate impact on working single mothers – and they are missing out on the critical support and contributions that other workers benefit from. In addition, our gender pensions gap research found that on average women will have a 10-year career gap to undertake caring responsibilities. This gap can also have a detrimental impact on future career and pay progression. Affordable and available childcare is a key enabler to support more mothers and families in their choices about their careers and working lives. We welcomed the continued delivery of measures on childcare and announcements at the Spring Budget on child benefit – but we are keen to see the practical and delivery challenges for childcare provision addressed.
“The scale of the gender pensions gap remains vast and will require bold policy actions. Setting out a roadmap for the future of automatic enrolment, including tackling difficult issues of adequacy in retirement – which affects women disproportionately – should be front and centre of next steps.”
John Adams, Senior Policy Analyst at the Pensions Policy Institute, echoes these sentiments, stating the need for concerted efforts to improve labour market conditions and provide better access to affordable childcare saying “Data shows that single parents have the lowest average income and single mothers have the lowest rate of labour market participation of all groups.
“This in turn significantly impacts their ability to save for retirement; with the average woman in the UK retiring with two-thirds less than the average man. Inequalities in the labour market, taking time out of employment, as well as employers not investing in the careers of those with caring responsibilities, can all have a serious impact on the later life outcomes of those raising children on their own.
“While there are some pensions policy options that could be introduced to help single parents save for their retirement, it’s unlikely to significantly improve their outcomes without changes in labour market conditions and better access to affordable childcare.”
