Happy Mother’s Day: the financial penalty of being a woman
Fidelity’s new Financial Power of Women report has identified four ‘penalties’ women face over the course of their lives.
The Motherhood Penalty
At some point in our working lives, many women take time off to have children. The divergence in men’s and women’s salaries starts during the childbearing years. Any additional time taken off after statutory maternity leave, or if women go back part-time, often results in a drop in earnings. Research from think tank the Social Market Foundation highlighted working mothers earn 20% less than fathers ten years after the birth of their last child. Shared parental leave remains chronically underused: just 8,700 new parents opted to take shared parental leave in 2016/2017 – 1% of those eligible to do so.
The Childcare Penalty
British parents shoulder some of the highest childcare costs in the world. This year, the average price of 25 hours of care a week for a child under two in a nursery is £6,300 per year, a 7% rise since 2017. For many households the cost of childcare often outweighs the monthly mortgage bill. Many parents calculate that they simply can’t afford to shell out their entire salary or more on childcare and make the financial and emotional decision to leave their careers to look after their children. However, it is still mostly women making this choice. ONS estimates show that in couples 65% of mothers are in work, compared to 93% of fathers.
The Good Daughter Penalty
We’re more likely to take time off work than men to care for elderly relatives. In 2016, around 8% of the private household population acted as ‘informal carers’ for someone. Nearly two-thirds (59%) of these carers were female and, overall, it’s estimated that unpaid carers provide social care worth £57 billion.
The Gender Pension Gap
Based on projections, the average pension for a man will be worth £142,836 at the state pension age of 68. For women, that figure drops to £126,784 – a gap of almost 11%. This is largely due to the gap in salaries. Women earn less, and consequently have less to contribute to pensions over the same – and often less – time. The remedy is to start early. Dedicating an additional 1% of salary towards a pension early on, could bump up a woman’s pension to £142,212. This equates to just an additional contribution of £35 per month on average for 39 years.