Single mothers and divorced women in retirement are the worst hit by the gender pension gap, according to new research.
Almost two million single mothers will struggle to afford basic necessities in retirement due to financial disadvantages in their careers.
According to the latest Women and Retirement report from Scottish Widows, three-quarters of single mothers will face a ‘motherhood penalty’.
Almost half (46%) have had to reduce their hours to manage childcare or permanently switch 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.
Divorced women are also likely to fall short of meeting a ‘minimum retirement lifestyle’, which typically costs £12,800 on food and holidays for a single person each year. Single women will also fall short, with 66% not on track to meet this threshold.
According to the research, not discussing pension assets during divorce means 83% of women lose out materially as well, costing them £77,000 in retirement.
There is a 39% gender gap in projected retirement income, with the average woman projected to earn £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 to receive a private pension, and 50% are expected to rely on other savings for retirement.
That said, upcoming changes to pension auto-enrolment could increase women’s future pension pots 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.
The Gender Pension Gap
Speaking about the report, managing director of Scottish Widows, Jackie Leiper 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.”
To boost mothers’ and single mothers’ retirement prospects, she said the government should prioritise affordable childcare.
Scottish Widows also found that more than half (52%) of grandmothers and 45% of grandfathers regularly looked after their grandchildren for at least one day of the working week.
Because of this, one in seven grandmothers (15%) have reduced their work hours to raise their grandchildren, which means they have less money for necessities.