New data reveals that the earnings of single mothers will significantly impact their ability to save enough into their pension pot for retirement.
- Research by NOW: Pensions and the Pensions Policy Institute (PPI) reveals that single mothers earn 53% less than the ‘average’ man and 37% less than the ‘average’ woman
- Today, women retire on average with pension savings of £69,000, compared to £205,000 for men
- On average, women spend 10 years away from the workforce to raise families or take on other caring responsibilities, which amounts to an average of £39,000 in lost pension savings
- Single mothers have lost out on over £852m in missed pensions contributions due to being ineligible of auto enrolment since 2012.
Single parents have the lowest average income for both men and women, according to the latest research.
On Single Parents’ Day, data from NOW: Pensions reveals single fathers earn 32% less than the ‘average’ man, while women fare even worse, with single mothers earning 53% less than the ‘average’ man and 37% less than the ‘average’ woman. The data also reveals single mothers have the lowest rate of labour market participation of all groups – which will significantly impact their ability to save enough into their pensions for retirement.
In the UK, women retire on average with just £69,000 in their pension pot – that’s two-thirds less than men, who retire with an average of £205,000 saved.
Research by NOW: Pensions and the Pensions Policy Institute (PPI) reveals the one of the biggest causes is the differences in working patterns between men and women over the course of their lives. On average, women spend 10 years away from the workforce to raise families or take on other caring responsibilities. This career gap amounts to an average of £39,000 in lost pension savings.
While progress has been made in improving gender equality within society, gendered norms around childcare still disproportionately impact women. The data shows that in 2022, fathers accounted for just one in nine stay-at-home parents, compared to one in 14 in 2019.
Single parents continue to miss out when it comes to workplace earnings – with 1 in 3 of all working single mothers being ineligible for a workplace pension under current auto-enrolment rules. This is despite over half (59%) being in employment. Consequently, working single mothers have missed out on over £852m in pension savings since the introduction of auto enrolment in 2012.
The number of single mothers working part-time is at 54% compared to the UK average of 21%. The high proportion of part-time workers means that they might not meet the eligibility criteria as pension saving is only triggered once earning £10,000 in a single role. Therefore, single mothers are missing out on being automatically enrolled and therefore also missing out on employer contributions and tax relief.
Lizzy Holliday, Director of Policy and Public Affairs, NOW: Pensions comments: “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.
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, Pensions Policy Institute, comments: “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.”
Learn more about how NOW: Pensions are working to raise awareness and lobby for change for a fairer pension system to enable all pension savers to enjoy the retirement they deserve.
ENDS
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Notes to Editors
NOW: Pensions’ policy proposals for a fairer UK pensions system
- Remove the £10,000 auto enrolment trigger
Currently, employees only qualify for auto enrolment once they earn more than £10,000 per year through one employer. This excludes many women who hold multiple jobs, work part-time or as freelancers. - Remove the lower earnings limit
Pension contributions are only taken once the qualifying earnings amount of £6,240 has been deducted. This means an employee earning £10,000 will contribute 5% on as little £3,760. The Pensions Extension Act provide DWP with the power to changes this by regulations – the next procedural steps to deliver this, a consultation, is needed urgently. - Introduce a family carer’s top-up
Career interruptions have a major impact on pension wealth. A family carer’s top-up would see those taking time out of work paid at the equivalent of an employer’s contribution at the same level as the National Living. - Considering pension pots on divorce
In many cases, pension savings are often the second most valuable asset after a home. This is why it’s essential women understand this when settlement terms are being negotiated. In a divorce situation sharing pension savings could play a huge role in narrowing the GPG. - Ensure affordable childcare is available for those who want to return to work
The cost of childcare prevents many women from returning to work. Making it more affordable and accessible will allow those who want to return to work to do so.
About NOW: Pensions
NOW: Pensions is an award-winning UK workplace pension provider. We look after the pension savings of tens of thousands of employers and millions of members from a wide range of industry sectors.
We have a clear mission – to help everyone save for a more financially secure future. This means achieving the best financial outcomes for our own members, while fighting for a fair pension system to enable all pension savers to enjoy the retirement they deserve. We do this by highlighting pension inequalities and campaigning for change.
We are the UK’s third largest auto enrolment pension provider by number of members.
NOW: Pensions is part of the Cardano Group, a market leader in providing risk and investment management services designed to make pensions outcomes more stable and robust.