Women’s earnings more likely to be impacted by children

Women’s earnings are more than twice as likely to be affected than men’s after having children

Further evidence of a ‘Motherhood Penalty’ hitting women’s pension savings has been revealed in new research by The People’s Pension, which shows that women’s earnings are twice as likely to be affected after having children than men’s, which can have a lasting impact on their pension savings.

The poll of more than 2,400 people across the UK, conducted by YouGov, found that since having their child(ren):

  • Four-in-ten women (43 per cent) reduced their working hours compared to less than one in 10 (nine per cent) men.
  • A third of women (31 per cent) stopped working for a period compared with just 4 per cent of men.
  • Only a quarter of women (24 per cent) said that their pay hasn’t been adversely affected compared to almost two thirds of men (63 per cent).

With one in five women (20 per cent) stopping or decreasing their pension savings, and only four per cent of women increasing their pension contributions, it appears unrealistic to expect women who are experiencing a significant drop in their household income while they care to, at the same time, pay more into their pension.

The People’s Pension is calling on the next Government to accept the principle that caring is an economic activity which should attract workplace pension contributions and address the crippling costs of childcare through better funding.

Commenting, Gregg McClymont, the director of policy at The People’s Pension, said:

“It’s clear that women’s working lives, much more than men’s, are dramatically affected after having children, causing a knock-on effect on their current and future finances.

“Voluntary additional pensions provision is unrealistic for most women at a time when household finances are especially stretched. But without those pension contributions many women’s pension pots fall behind men’s and never recover the lost ground. That’s why we’re calling on the next government to accept that raising a family is an economic activity that deserves workplace pension contributions and to address the cripplingly high costs of childcare in the UK.”

The survey also found that the majority of workers are ill-prepared for retirement, as nearly two thirds of people (64 per cent) don’t think they’re saving enough.

To afford life in retirement, six in 10 people (61 per cent) intend to rely on a private or workplace pension; a third of people will carry on working part-time (33 per cent) or use their savings (35 per cent); two in 10 people (21 per cent) are reliant on their partner’s pension while others are depending on inheritance (18 per cent), downsizing their home (17 per cent), or winning the lottery (five per cent).

Gregg McClymont added:

“While automatic enrolment has got off to a great start it’s clear that millions of people still aren’t saving what they need to. We’re calling on the next Government to build on the success by helping workers to save more and ensure that millions of people aren’t unnecessarily excluded from auto-enrolment.”

ENDS

Childcare costs widen gender pensions gap

How fair a society do we live in? It’s a question that’s often asked and, depending on your world view, the answer often differs wildly.

Decision makers often like to tell us that we have never had it so good but even the best poker player would struggle to keep a straight face while claiming that we are all dealt the same hand.

One area where there is still much work to be done is the divide between the sexes. Despite talk that the gender gap is getting that much smaller, the evidence is clear that far more is needed to be done before the balance is truly redressed.

The gender pensions gap is a prime example of the stark gap; according to research by Prospect the union, the average female pensioner is £7,000 a year worse off than a man her age1. Changes to pensions policy will help but if we’re going to really tackle pensions inequality head on, then we really must look at the ‘motherhood penalty’ women face when they have children.

Our research found that after having children, nearly half of women reduced their hours, more than a third left work altogether and more than one in five returned to work in a lower grade or lower paid role.

According to a YouGov survey commissioned by The People’s Pension, after having children nearly half of women (44%) reduced their hours, more than a third (36%) left work altogether, while more than one in five (15%) returned to work in a lower grade or lower paid role.2

These changes in their working lives have a significant impact on a woman’s ability to save for a pension at the same level as their male counterparts. It’s hard to avoid the unpalatable fact that women are more likely to need to stop or dramatically reduce their pension contributions, meaning they may miss out on employer contributions and lose the investment gains their contributions would accrue.

While many women choose to reduce their hours or stop working because they want to spend more time with their children, many said it didn’t make financial sense to keep working and pay for childcare or they couldn’t afford childcare. Almost four in 10 women (38%) who returned to work on reduced hours after having a child would have increased their hours if childcare was more affordable.

We’re calling on ministers to redress the balance by recognising caring as an economic activity which should attract workplace pensions contributions from the Department of Work and Pensions as well as covering the real cost of the guaranteed 30-hours per week childcare for all three and four year olds with a single, specific earmarked grant.

It must also be remembered that workers who earn more than £10,000 from one job are automatically enrolled into a pension, which excludes many part-time workers. Reducing the auto-enrolment eligibility threshold from that figure to the National Insurance trigger of £6,240 would create 1.3 million savers – two thirds of whom would be women.2

We have been waiting long enough for a timetable for the removal of the lower qualifying earnings band, as recommended in the Automatic Enrolment Review of December 2017. This would mean that all those automatically enrolled contribute from the first pound of earnings, rather than the current figure of £6,240.

This would also mean all those earning below the earnings trigger who opt into auto-enrolment would be entitled to an employer contribution.

While we’re on the subject of government promises, before the last election, the Conservatives made a manifesto pledge to look into the ‘net pay anomaly’, which means that 1.75 million workers, three quarters of whom are women, miss out on pensions tax relief, which worked out over a career amounts to an eye watering £8,0003.

The list of demands currently placed before our decision makers is as long as it ever has been in recent history but we must not allow potential reforms that make life fairer for more than half the population to be kicked into the long grass.

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Read more and download our full research report on the gender pensions gap.

Childcare widening gender pensions gap warns provider

Childcare costs widening gender pensions gap warns The People’s Pension, as almost four in 10 women would choose to work more if childcare was cheaper

The People’s Pension1, a leading not-for-profit pension provider, has warned that childcare costs are widening the gender pensions gap, as new research finds that almost four in 10 women (38 per cent) working part-time would choose to increase their hours if childcare was cheaper2.

The gender pensions gap is currently more than double the size of the total gender pay gap with the average female pensioner £7,000 a year poorer than her male equivalent.3

In a new report, ‘The Gender Pensions Gap; Tackling the Motherhood Penalty’, The People’s Pension highlights that while changes to auto-enrolment pensions are needed to ensure lower earners or part-time workers – the majority women – aren’t penalised by the current policy, an inescapable root cause of the gender pensions gap is the ‘Motherhood Penalty’ women pay when their children are born.

The People’s Pension’s survey of 2,000 mothers across the UK, carried out by You Gov, found that after having children, nearly half of women (44%) reduced their hours, more than a third (36%) left work altogether and more than one in five (15%) returned to work in a lower grade or lower paid role.4

These changes in their working lives have a significant impact on their ability to save for a pension at the same level as men; women are likely are likely to stop or significantly reduce their pension contributions, meaning they may miss out on employer contributions and lose the investment gains their contributions would earn.

While many women choose to reduce their hours or stop working because they want to spend more time with their children, the survey found that:

  • Of those that left the workforce altogether, more than four in 10 (43 per cent) said it didn’t make financial sense to keep working and pay childcare, while three in 10 (29 per cent) said they couldn’t afford suitable childcare5
  • Of those that reduced their hours or role after having a child or children, more than a third (36%) said it made more financial sense to work part-time than pay for childcare, while almost a quarter (23%) couldn’t afford suitable childcare6
  • Almost four in 10 women (38%) who returned to work on reduced hours after having a child would have increased their hours if childcare was more affordable2

Sam, 32, from Northamptonshire has three children under the age of eight and gave up work when her eldest was born.

“I gave up my job working in a supermarket as the cost of childcare would have been far more than my wages. I haven’t worked since my son was born – with my husband the sole earner – as we were better off with me at home. I’m at a point now, with two of my kids in school, where I want to go back to work but finding something that makes sense financially, with hours that work for us, is really difficult.”

Childcare in the UK is more expensive than anywhere else in Europe7. Analysis by The People’s Pension suggests that a woman in London with a child under two, who earns the median full-time income, will pay three-fifths of their after-tax earnings (60 per cent) on childcare, commuting and associated expenses, reducing take home pay to £9,700 per year or a little over £800 per calendar month. Outside of London the numbers aren’t much better with a woman on the median full-time salary paying 44 per cent of after-tax income in childcare costs, leaving her with around £13,000 a year to live on. 8

Commenting, Gregg McClymont, director of policy at The People’s Pension and former shadow pensions minister, said:

“The gender pensions gap is stark. By the time the average woman reaches retirement, the size of her pension pot will only be a fifth of that of a man her age. Women are getting short-changed on pensions for several reasons – not least because of the caring responsibilities they tend to take on across their lifetime.

“To look after their children, women often reduce their working hours or stop working altogether and their rates of pay and potential for progression can be unfairly affected, all of which mean their potential pension savings take a hit.

“Of course, many women choose to reduce their working hours or leave their job because they want to spend more time with their kids, but our research is clear – the cost and availability of childcare is a key factor for many women. If we’re going to tackle pensions inequality, not only are changes to auto-enrolment required but better provision of affordable childcare is a must to enable those mums that want to keep working or work more hours, to be able to.”

To help reduce the gender pensions gap, The People’s Pension is urging the government to consider measures to improve childcare provision across the UK and ensure women aren’t penalised by current pension policy.

These measures include:

  • A single, specific ear-marked grant to local authorities to cover the real cost of the guaranteed 30-hours per week childcare for all 3- and 4-year olds
  • Cutting the required earnings to be eligible for an auto-enrolment pension to the primary National Insurance threshold to bring in half a million new pension savers – three-quarters of whom would be women
  • Bring quality childcare back to UK high streets by offering imaginative schemes to providers willing to fit out vacant shops and by making private nurseries exempt from business rates
  • Abolishing the net-pay tax quirk to ensure 1.75m low earners, the majority women, receive much-needed tax relief through auto-enrolment that they currently miss out on
  • increasing the maximum amount of childcare costs paid for under Universal Credit to ensure parents are better off for every extra hour worked and switch to upfront payments for childcare so that parents can afford to begin work
  • extending the existing system of state pension carers credits to auto-enrolment reducing the pensions gender gap in auto-enrolment savings

For Keziah, 37, from Leicestershire, if it wasn’t for family support, she wouldn’t have been able to continue working after the birth of her daughter as childcare cost more than she earned.

“As a single mum and the sole earner in our house I had to keep working full-time in order to pay our bills. Thankfully childcare wasn’t a cost I had to juggle as my mum looked after my daughter while I was at work. I’d already had to move to a different job and take a pay cut to allow me to balance parenting and work, and without mum I would have had to give up my job altogether as nursery fees cost more than I earned at the time.”

ENDS

The gender pensions gap: tackling motherhood penalty

The gender pensions gap – the inequality between men and women’s pensions – is more than double the size of the total gender pay gap, with the average female pensioner is £7,000 a year poorer than her male equivalent.

Our new report, ‘The gender pensions gap: tackling the motherhood penalty’, highlights that childcare costs are widening the gender pensions gap, with almost 4 in 10 mothers who reduced their working hours after having a child, saying they’d work more if childcare was cheaper.

Our survey of 2,000 mothers across the UK, with children under the age of 10, carried out by YouGov, found that after having children:

  • nearly half (44%) reduced their hours
  • more than a third (36%) left work altogether
  • more than one in five (15%) returned to work in a lower grade or lower paid role.

These changes in women’s working lives have a significant impact on their ability to save for a pension at the same level as men; women are likely to stop or significantly reduce their pension contributions, meaning they may miss out on employer contributions and lose the investment gains their contributions would earn.

While many women choose to reduce their hours or stop working because they want to spend more time with their children, we found that the cost of childcare played a key role in women’s decisions.

Download ‘The gender pensions gap: tackling the motherhood penalty’ report