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Single mothers face £246,000 pension shortfall

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Written by: Emma Lunn
16/11/2022
Couples with children have an average of £275,000 in total assets when they reach retirement – while single mothers typically have assets worth just £29,000.

The figures from Scottish Widows show how this demographic is amongst the hardest hit by rising living costs, with 28% of single mothers currently cutting back on essentials.

The £246,000 shortfall comprises all wealth including pension savings, with single parents typically having just £15,000 saved for retirement.

Scottish Widows’ latest Women and Retirement Report said the gap in total wealth between the two groups is just one example of the mounting challenges facing women as they save for their future.

Gender gaps in pay and pensions

The report found that gender gaps in both pay and pensions between men and women across the UK are worsening year-on-year.

In pay alone, the average man earns £33,000 a year, compared to £22,800 for the average woman – a £10,200 annual difference, driven in part by pay stagnation and a growing median pay gap between UK men and women.

The report revealed the uneven effects of cost-of-living increases are exacerbating structural inequalities, and negatively impacting the retirement prospects of most UK women.

Scottish Widows found that women are more likely than men to report inadequate retirement savings with nearly one in five (19%) women in their 30s saying they are saving nothing at all for retirement. In addition, one in six (16%) women across the UK said they are cutting back on retirement savings to cope with rising prices.

Persistent inequalities

Scottish Widow said the UK’s 1.7 million single mothers – equating to one in five households with children – are particularly vulnerable to these persistent inequalities, often balancing single income sources with the additional costs and responsibilities of raising children alone.

The report found that women who are single mothers for a significant portion of their working lives often go on to struggle in retirement. Four in 10 (40%) single mothers said they are not a member of a pension scheme, compared to 29% of all women.

Even where single mothers do save into a pension, they often balance lower incomes with the increased financial pressures of raising children alone, which can require more time spent out of work.

Less disposable income to save

Increased childcare and housing costs mean single parent households typically spend more relative to their disposable income than couples. Lone parents spend about 87% of their average disposable income, compared to 67% for two-parent households, leaving them very little cash to save.

Jackie Leiper, managing director of workplace savings at Scottish Widows, said: “Despite increased reporting, stubborn gender pay gaps persist for women across the UK. Our research shows that single mothers are much more likely to be exposed financially, cutting back in ways that jeopardise their wellbeing.

“Current economic conditions are making it harder than ever to fix the deep inequalities that underlie the pensions gap, with the retirement savings of women deeply impacted by key life events such as divorce or motherhood. Providers, regulators and employers must collaborate urgently to address this crisis – from reconsidering the auto-enrolment threshold to far greater investment in childcare support – to help the most vulnerable in the near-term.”

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