Almost two million single mothers will struggle to afford basic necessities in retirement thanks to the financial disadvantages they face in their careers.
The latest Women and Retirement report, part of the National Retirement Forecast from Scottish Widows, reveals a “motherhood penalty” that will affect three-quarters of single mothers.
Almost half (46%) have had to reduce their hours to manage childcare or make a permanent move to part-time work at age 30, which costs them £47,000 out of their pension pot.
More than a third (37%) of single mothers leave their jobs to look after children, and 48% said having children slowed their career progression. The average cost of childcare for a child under two is £14,000 per year, which could be two-thirds of an average annual salary.
The report suggests that 60% of divorced women are also not on track for at least a “minimum retirement lifestyle”, which it estimates costs £12,800 for an individual per year to spend on food and one holiday. Single women overall will also face a deficit, with 66% not on track to meet this threshold.
Retirement savings
Three-quarters of ethnic minorities don’t have a workplace pension
Not discussing pension assets during divorce means 83% of women lose out materially, according to Scottish Widows. This could cost them £77,000 in retirement, it estimates.
The company argues that there is a 39% gender gap in projected retirement income, with the average woman on track to receive £12,000 per year (in today’s terms) during retirement compared to £19,000 for the average man.
Only 59% of women are on track for a private pension and only 50% are expected to draw on other savings for their retirement.
That said, upcoming changes to pensions auto-enrolment could increase women’s future pensions pot by £46,000, it predicts. The changes to auto-enrolment rules will lower the age at which an employee can be enrolled from 22 to 18.
Jackie Leiper, managing director of 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.”
She added that the government should prioritise affordable childcare so mothers and single mothers could boost their retirement prospects.
Scottish Widows also found that more than half (52%) of grandmothers and 45% of grandfathers were regularly looking after their grandchildren for at least one day of the working week.
As a result, more than one in seven grandmothers (15%) have had to reduce their working hours to help raise their grandchildren, meaning they have less money to spend on basic living costs.
Alesha De-Freitas, head of policy, advocacy and research at the Fawcett Society, said: “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.”
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