How is the rising cost of living impacting single mothers?
The rising cost of living is a challenge for everyone, but single mothers are particularly vulnerable, with often only a single source of income and additional costs and responsibilities in raising children. And they are not a small group either. There are nearly 1.7 million single mothers with dependent children in the UK today, and they constitute 20% of households with children (there are also around 200,000 single fathers).5
Single mothers are some of the most likely to report being very concerned about the rising cost of living – 55% report being so, compared to 42% of women in general and 36% of men. Single mothers are also more likely to report cutting back on essentials, with 28% reporting doing so compared to 24% of women and 19% of men.
The current challenges for single mothers compound the difficulties they have in building their financial resilience and long-term savings. In general, single mothers are some of the least prepared for retirement. 72% are concerned about running out of money in retirement, compared to 61% of all women and 52% of men. Single mothers are also far more likely to say they are not a member of a pension, 40% compared to 29% of women.
There’s a particular disparity in financial positions for lone parents (almost 90% of whom are women). Looking specifically at pension wealth we can see that only 64% of lone parents have private pension wealth (compared to 84% of the wider population). Average pension savings are under £15,000 for lone parents compared to over £80,000 for couples and £57,000 for single households.6
This picture reflects the multi-faceted challenges that single parent households can face. A combination of lower income and higher costs means that single parent households spend 87% of their income, compared to about 67% for two-parent households – meaning that single parents will have very little disposable income to fall back on.7 Given these conditions, it is particularly concerning that nearly a fifth (19%) of single mothers say they are reducing retirement savings in response to the rising cost of living.
The issues facing single mothers have no single solution. Inequalities in income are not easily resolved but there is clearly more that can be done to support single parents, particularly provision of childcare for those with young children, allowing equal access to the workplace. At the same time, the challenges in building up assets mean that many single mothers will be particularly reliant on sources of income including the state pension and it becomes especially important that they have sufficient work record to maximise their entitlement.
How can we close the pensions gender gap?
There’s still a lot more to be done to fully close the gap. The cost of living crisis is having a disproportionately worse impact on women than society at large, and there needs to be more support for childcare, which is a significant financial challenge and barrier to wider equality.
The findings from this year’s Women and Retirement Report reinforce the calls to action of the Scottish Widows Retirement Report published in June 2022. It remains imperative for the UK Government to support households through the rising cost of living, and we welcome the recent focus on the need to grow the economy, which is fundamental to driving up long-term real wages. The call for a gradual rise in automatic enrolment contributions is also necessary for helping to secure good retirements for all, and bridge some of the gender gap.
By directly addressing the societal structures that exacerbate the pensions gender gap, we’ll stand a better chance of closing it. Cost of living may be front of mind at the moment, but ultimately the shortfall was huge even before the current crisis, and before the Coronavirus pandemic. There are some significant measures that we would like to see the UK Government and wider industry come together to deliver to help address the societal blockers of pensions equality:
- Equalise shared parental leave rights, addressing the cost of childcare and continuing efforts to raise awareness of the gaps.
- Ensure the content and delivery of financial education is appropriate for all demographics by encouraging greater financial understanding and engagement from an early age, especially in a way that best supports women and ethnic minorities.
- Provide additional guidance and encouragement for young women to contribute to workplace pensions in a way that considers the particular challenges they may face.
- Implement the Money and Pension Services proposals to develop tailored guidance for women in the workplace.
- Ensure that men and women make informed decisions about annuities and the role of joint annuities in providing an income after the death of a partner. The default should be for providers to first show couples a joint annuity.
These are not quick fixes, but through these measures we believe that some of the long-term issues that make retirement outlooks much bleaker for women could be effectively addressed. It’s only through concentrated efforts to close the pensions gender gap that we’ll be able to bring about a better retirement for everyone.
Read the full report