• The average cost for part-time (25 hours) childcare in the UK is £127 per week 1.
• 69% of mothers considered not returning to work as a result of childcare costs.
• 68% of mothers agree that without the support of family and friends, returning to work would be impossible.
• Modelling by the Pensions Policy Institute finds that receiving a family carer top up while out of work and receiving pension contributions from the first pound of earnings when in work would more than double (114%) a mother’s pension pot.
NOW: Pensions research 2 reveals that despite nine in ten mothers (91%) wanting to return to work over 69% considered not returning because of childcare costs. As a result, UK grandparents are now saving parents over £22.5bn* a year in childcare costs, aiding mothers to go back to full-time work.
68% of respondents agreed that, without the support of family and friends, childcare would be impossible. In fact, according to the Office for National Statistics, despite the rate of working mothers being at its highest ever, at 75%, almost three in ten mothers (28.5%) with a child aged 14 years and under said they had reduced their working hours because of childcare reasons 3.
Working part-time to balance childcare responsibilities has the biggest impact on women’s ability to save for their future, with women currently reaching retirement age with £100,000 less than men in their pensions. These differing working patterns between men and women account for 31% of the gap. The gender pay gap accounts for 19% of the gap.
Furthermore, a part-time salary might mean women don’t meet the £10,000 per year threshold in a single job to be auto enrolled into a pension scheme, causing them to miss out on a workplace pension and receiving vital employer contributions.
Joanne Segars, Chair of Trustee, NOW: Pensions said: “The cost of childcare on the UK economy and latterly, on women’s pensions, needs to be urgently addressed by the government. While it’s encouraging to see that more women than ever are in work, more needs to be done to ensure that they have an equal opportunity to save for a comfortable retirement.
“Whilst auto enrolment continues to give workers the head-start they need to prepare for their retirement, the focus now needs to be on helping mothers return to the workforce. We are leaving it to grandparents to provide free childcare when we should be adopting a similar model to our EU counterparts whose economies are benefiting by getting mothers back into the workforce faster.”
NOW: Pensions is putting forward the following proposals to help close the gender pensions gap.
What can organisations do?
The biggest cause (31%) of the gender pensions gap is due to different working patterns between men and women. This is because women need to take time out of the workforce or reduce their hours in order to take on childcare responsibilities. If women are helped back into the workforce more quickly after having children, this will help to close the gender pensions gap. NOW: Pensions is fully supportive of flexible working practices in order to cater for an equal working society, enabling women to return to work, save for retirement, and boost much-needed productivity rates across the UK.
What can the member (individual) do?
NOW: Pensions research shows that women need to save between 5% – 7% more than their male counterparts throughout their working lives to allow for living longer. Women generally live 3.7 years more than men meaning their pensions need to last longer. It is recommended that women continue to pay into their workplace pensions even when they are presented with more financial stress after having children. This is because a workplace pension is boosted by tax relief and employer contributions.
What can grandparents can do?
Grandparents and other family members under state pension age who look after children under 12 while the parents work can claim valuable tax credits which could as national insurance credit for those who don’t otherwise work. The child’s parent must sign over their child benefit national insurance credit to the grandparent and only one grandparent or family member can receive the credit. This can be claimed all the way back to April 6 2011 for any caring you may have done.
What can the Government do?
NOW: Pensions has been working with the Pension Policy Institute, modelling which two policies of our five-point plan4 have the greatest impact on closing the gender pensions gap. The two policies below could reduce the gender pensions gap by around 50%, having increased women’s pots by 114%.
- Introduction of a family carer top-up – While on maternity pay: employer contributions remain on pensionable salary before; employee contribution is based upon the National Living Wage (NLW); while out of work and caring: benefit paid as pension contributions based upon automatic enrolment minimums upon NLW, payable alongside National Insurance credits towards the State Pension; while in part-time work to accommodate caring: a top-up benefit paid to ensure a minimum contribution equal with being out of work and receiving the benefit above.
- Auto enrolment contributions on every pound of earnings – removing the lower qualifying earnings band would improve the pension of part-time workers who are more likely to be women. Currently, the first £6,136 of a salary is not included in pension contributions.
Notes to editors
Research respondents: 2,003 mothers aged 45 and under from the UK who are employed, on maternal leave, or a full-time mother. The research fieldwork took place on 11th–15th October 2019.
Age UK research: 68% of 5 million grandparents (3.4 million) are looking after their grandchildren at least once a week.
(3.4 x £127 (cost of childcare per week) x 52 (weeks)) = £22.453bn.
For more information
Tel: 07827 3555 18
Tel: 0207 947 5327
About NOW: Pensions
NOW: Pensions entered the UK market in 2011 with a simple and cost-effective workplace pension designed specifically with the auto-enrolment market in mind. It is one of the UK’s largest workplace pension providers with nearly two million members and tens of thousands of employers from a wide range of sectors.
Closing the Gender Pensions Gap
NOW: Pensions is pleased to be hosting our second conference this year on 4th November, looking at solutions and how we can best close the gender pensions gap. At this conference, NOW: Pensions will be looking at the possible solutions to closing the gender pensions gap and asking: What can members do, what can organisations do and what role do the Government play. Keynote speakers include Baroness Stedman-Scott (Work and Pensions Minister in the House of Lords) and Anna Whitehouse (a.k.a. parental lifestyle blogger Mother Pukka). https://www.nowpensions.com/bridging-the-pensions-inequality-gap/speakers/
1 As published on Money Advice Service, research by Childcare Survey, Coram Family and Childcare.
2 Research conducted by Atomik Research among 2,003 mothers aged 45 and under from the UK who are employed, on parental leave, or a full-time mother. The research fieldwork took place on 11th-15th October 2019.
3 ONS, Families and the labour market, UK: 2019