Covid casualties: almost half of working single mums are excluded from auto enrolment (43%) – up from 31% before the pandemic

  • 43% of single mothers – around 400,000 women – are currently locked out of automatic enrolment
  • This is an increase of 100,000 since the start of the pandemic
  • The average private pension savings for single mothers is £18,300, approximately a third (36%) of the average woman, at £57,500 and less than an eighth (12%) of the average pension pot of men, of £203,200
  • The average single mother’s income is £16,890 – this is £1,400 less than at the start of the pandemic and (39%) lower than the UK average of £27,376

Ahead of National Single Parent’s Day on Sunday 21 March, new research conducted by NOW: Pensions, the pension provider for 1.8 million people, and the Pensions Policy Institute (PPI), has found that almost half of single mothers are now ineligible for auto enrolment.

Due to the COVID-19 crisis, there are now 400,000 single mothers who are locked out of workplace pension saving, meaning fewer savings opportunities, made worse by the continuing economic downturn. This is up by one third on last March’s figures.

COVID-19 and childcare

The Office of National Statistics (ONS) has reported women consistently spent more time on unpaid childcare during the pandemic, with 99% of women reported to have spent more time looking after their children than men. Over the past year, notably, single mothers have had to juggle their work with household chores and schoolwork meaning they are likely to have reduced their working hours or stopped working altogether. Our research found that single mothers in part-time work earn on average just £6,922 therefore not meeting the eligibility criteria as pension saving is only triggered once earning £10,000 in a single role.

NOW: Pensions’ research also found that, before the pandemic, 22% of the working population worked part-time, compared to 43% of single mothers. This is likely to have been significantly exacerbated by lockdowns and school closures.

Being out of a workplace pension means missing out on opportunities such as employer contributions.  Policies aimed at alleviating childcare responsibilities, in terms of both time and stress, could help to improve labour market inequalities experienced by single mothers. These kinds of policies could reduce levels of part-time working and help single mothers to overcome issues of vertical segregation and low pay in the workplace. 

Single parents are building up more debt

NOW: Pensions’ research also found that the incomes of employed single mothers has fallen by £1,400 on average since last March. Gingerbread, the charity for single parents, supports this claim as it found that 49% of single parents reported taking on more debt since COVID-19 and the average amount of debt held by single parents increased by around 15% during the pandemic, which works out to around more than £600 per household.

In addition to this, our research with the PPI found that only 26% of single mothers own a home compared to the UK baseline of 65%. Single mothers are less likely to be able to save for a deposit as rental costs are often disproportionately high and their lower than average household income makes it more difficult to secure a mortgage. This has significant consequences on wider financial health.

The pandemic’s effect on work

A survey conducted by Trade Union Congress found 18% of mothers had been forced to reduce their working hours and around 7% were taking unpaid leave from work and receiving no income – two situations as a result of the pandemic which will exacerbate the pensions savings gap.

The number of women furloughed during the pandemic was consistently higher than men between 1 July and 31 December 2020, with Pregnant then Screwed reporting 65% of mothers who have been furloughed say a lack of childcare was the reason. NOW: Pensions’ analysis found that being furloughed impacts pensions disproportionately, reducing auto enrolment contributions by 25%, 5% higher than the 20% wage cut. This is due to a quirk in the system which means the first £120 of weekly pay doesn’t count towards pension contributions so furlough hits harder on the slice of pay that’s pensionable.

The long-term effect on single mothers’ finances

The number of single mothers missing out on a workplace pension is rising, meaning they are missing out on vital employer contributions. Currently, single mothers reach retirement with a private pension income of just £3,350. The PLSA’s retirement living standards suggest an income of £20,200 a year is needed for a ‘moderate lifestyle’ which means single mothers face pension poverty.

With all the financial difficulties that the COVID-19 pandemic has caused for single mothers, being the sole earners and carers of a household, it is getting increasingly difficult for them to save for retirement. With 43% of single mothers now locked out of workplace pensions, the policy proposals of removing the auto enrolment trigger and starting contributions from the first £1 of earnings, this would bring an additional 400,000 single mothers into workplace pensions.

Farah Baldock, Head of Communications at Gingerbread, said: “Single parents face significant barriers to entering and progressing in work that offers long term financial security.  Unable to ‘shift parent’ in the same way as couple parents can, single parents are far more reliant on external childcare support in order to work.  The high costs of childcare mean many will only be able to work in part-time or insecure roles, limiting their earning potential.  Coupled with greater demands on their income as the sole earner in the household, single parents are often at greater risk of falling into debt just to make ends meet meaning savings and pensions are simply out of reach.

“COVID-19 has only exacerbated the situation.  The pressures of juggling work, caring for children and home-schooling with no external support has forced many to reduce their hours of work or leave work altogether.  Urgent support is needed to reduce the barriers single parents face in securing quality, flexible and sustainable jobs that work around their caring commitments – without this single parents are at risk of being locked out of work altogether and this economic disadvantage will follow them throughout their lives.  It’s not right that such a large section of our society will continue to experience hardship well into retirement simply because they are single parents and more must be done to ensure they are not left behind.”

Samantha Gould, Head of PR and Campaigns at NOW: Pension commented: “It is worrying to see that single mothers’ ability to save for their futures has been hugely affected by the COVID-19 pandemic with almost half now ineligible for automatic enrolment. After what has been a difficult year with women bearing the brunt when it comes to being furloughed and taking on the bulk of childcare responsibilities it is really troubling that that even more single mothers have been locked out of pension saving during a time when finances have already been hit.

“With research from Coram Family revealing that childcare costs have in fact increased by 4% in this same period, single mothers will be feeling the pinch the most with many choosing to stop work altogether in order to care for their children. This perpetuates the current savings gaps experienced by some groups in the UK which needs to be addressed.

“NOW: Pensions are calling on the government to make important policy changes which would see another 3 million women; including a further 400,000 single mothers saving. We must ensure that everyone has an equal opportunity to save for their futures and build an adequate savings pot for later in life.”

Notes to editors

Of 1.8 million single parent households across the UK, 90% are headed by women. Because of the prevalence of single mother households, our release focuses on this group as the sample of men was too small to be statistically significant.

NOW: Pensions’ plan for fair pensions for all

  1. Removal of the £10,000 auto-enrolment trigger to get more women into auto enrolment
    This would bring an additional 2.9 million women in pension saving (400,000 single mothers).
  1. Auto enrolment contributions on every pound of earnings
    Ensuring pension contributions are taken from the first £1 of earnings would increase single mothers’ pension’s wealth by 52%, meaning a brighter retirement for single mothers.
  2. The introduction of a family carer’s top up
    Women taking time out to care are compensated in the State Pension by State Pension credits, however, they miss out on auto enrolment. The family carer’s top up would see the government pay the equivalent of the employers’ contribution at National Living Wage level into women’s pensions who are taking time out to care. This would equate to approximately £820 per year and would boost pension outcomes for women who take 10 years out due to caring responsibilities and returns to the workforce full-time by 20%.The family carer top-up can close around half of the pension wealth gap created by taking time out of work to care for family.
  3. Divorce – make pension sharing the default
    Ensuring that pension funds are always considered in divorce settlements – approximately 10% of men and 14% of women in their early 60s are divorced. The median pension wealth of divorced men and women by retirement is £103,500 and £26,100 respectively. These figures compared to the population indicate a pension wealth reduction of a third for men but a half for women, signifying a greater impact of divorce for women than men.Although pension pots can often be the second most valuable asset when people are going through a divorce, they are often overlooked, with people paying more attention to property assets.
    In 2018, there were 118,142 divorces but only 4,632 pension attachment orders were made by the family courts.
  4. Greater action on the availability and cost of childcare to enable those that want to return to work
    Despite tax changes that help families with childcare costs, prices continue to rise. The Family and Childcare Trust reported in 2018 that childcare prices for children under three had risen above both inflation and wages in the previous year. Costs grew by 7% to £122 for 25 hours per week, equating to £6300 per year. Analysis of freedom of information request data by Insurer Royal London shows the high cost of childcare means working parents with toddlers pay more for childcare than their mortgage.

More information

Samantha Gould – NOW: Pensions

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