Three in four single mothers face living in poverty when they retire, according to a new report released today by Scottish Widows.
The 19th annual Women and Retirement Report reveals that the ‘motherhood penalty’ – the financial and career disadvantages faced by working mothers – has an enduring impact into later life. Deep-rooted structural inequalities cause women to earn less, work less and save less for retirement when they become parents. This is exacerbated for single mothers who are unable to share the burden of day-to-day costs and childcare provision with a partner.
The latest report analyses women’s retirement prospects through the lens of the National Retirement Forecast (NRF)*, which uses the Pension and Lifetime Savings Association (PLSA)’s ‘Retirement Living Standards’ levels to calculate the quality of lifestyle that people are set to achieve when they stop working. In forecasting savers’ anticipated lifestyles, the NRF recognises that factors other than pensions play a role in the income people will rely on in retirement, and also accounts for housing and other costs.
The issue of unavailable or expensive childcare disproportionately impacts the job prospects of mothers, as more than a third (37%) leave jobs to look after their children, around half (48%) say that having children slowed their career progression and 51% of single mothers struggle to find jobs in the first place. With almost half (46%) of single mothers reducing their hours to manage childcare, the report found that a permanent move to part-time work at age 30 can cost women £47,000 in their pension pot at retirement.
The Parent Trap
Single mothers are already disadvantaged in the broader national picture presented by the NRF which highlights the gender pension gap of 39%. This is the difference in pension savings between men and women at retirement age. The average woman is on track to receive £12,000 per year of income in retirement after paying for housing expenses, which in today’s money is £7,000 short of the £19,000 income for the average man.
A main driver of the gap is that women take on substantially more childcare than men, which limits the amount they can work over their lifetime and reduces the amount they can save into their pensions. The report reveals that 50% of fathers say they share childcare equally with their partners while only 31% of mothers believe this to be true, with 56% of mothers saying they do the majority of childcare.
Most parents do not use professional childcare services, and for many that comes down to cost. The average cost of full-time professional childcare at a nursery for child under two in Great Britain is £14,071 per year. This childcare cost represents 64% of the take-home pay of the average person in Great Britain (65% for England, 51% for Scotland, 63% for Wales).*
This makes childcare unaffordable for the average family, with just over a third (37%) of mothers and 33% of fathers having professional childcare for any days of the working week.
Nearly half (44%) of mothers spend all five working days looking after their children (compared to just 16% of fathers), which limits the hours that women can work over their lifetime and compounds the impact of the gender pay gap. This is why the gender pension gap ends up being over double the size of the gender pay gap (39% compared to 15%). Despite expansions to childcare support recently announced by the UK Government, pressures are likely to continue.
Jackie Leiper, Managing Director Scottish Widows, 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.
“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. The government needs to prioritise affordable childcare to improve the retirement prospects for all mothers and single mothers in particular.”
The childcare issue also has ramifications beyond mothers, with more than half (52%) of grandmothers and 45% of grandfathers regularly looking after their grandchildren for at least one day of the working week. More than one in seven grandmothers (15%) have had to reduce their working hours to help raise their grandchildren, putting pressure on their own retirement lifestyle prospects.
Alesha De-Freitas, Head of Policy, Advocacy and Research at the Fawcett Society, said: “The findings of this report underscore the stark reality of the inequalities that disadvantage women throughout their lives. The government needs to make urgent changes to rebalance the drastic inequality that will see 75% of single mothers plunged into poverty when they reach retirement age.
“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.”
To find out more, read the full 2023 Women and Retirement Report here.