£2,000 Pension For New Mums! Yes Please, At The Very Least
We’ve all heard of the gender pay gap (unfortunately) but let’s turn our attention to its evil twin, the gender pension gap. It stands to reason, really, that if women are earning less they’ll be saving less. And of course women tend to live longer so they need more in their pension pots. But recent research has pin-pointed just how unfair the current state of play is when it comes to saving for later life.
Since auto-enrolment was introduced in 2012, more people than ever are contributing to workplace pensions - over 10 million more in fact! - which is great. But guess what? The scales are weighted against working mothers. Effectively, women are being penalised for having children.
The facts are revealed in a new study by Which?. It reveals that a woman who takes time off to have babies and raise their children will be left significantly worse off at retirement than a man or woman who doesn’t. How much worse off? Around £15k, that’s how much! This is because a woman who takes time off or works part-time after having kids will end up with retirement savings of about £68k, compared to an average of £83k for women who don’t take time off for motherhood. And yes, you guessed it, a whole lot less than men – fathers or not.
To redress this imbalance, the consumer group is petitioning the government to give a £2,000 “new parent cash injection”, to be invested and grown by a pension fund just as if the recipient were fully employed. Under this proposed scheme, a household could choose which parent’s pension scheme the money is paid into, or just use the standard auto-enrolment scheme.
Will it help? It surely will, but there’s still a long way to go. Not least by ensuring the provision of affordable childcare for all working families. Even taking the working-mum-factor out of the equation, however, women in general are saving less in their pension pots than men. For example, last year, according to Which?, male retirees received an average of £154 a week compared to £126 for females. That adds up to nearly 30 grand more for men, assuming they are retired for 20 years.
While the reasons for this are systemic and will need a long-term untangling of traditionally gendered attitudes to working, saving and investing, Which? has made another suggestion which could help. They’re proposing that the government raise the minimum contribution allowance from 8% to 12% so that middle income earners will be allowed to save more. If this were put in place, the average woman in employment could see an extra £50k going into her pension by the time she stops working.
So things may be looking up for the working mother. If, that is, the government decides to act on Which?’s suggestions, which is far from certain. Responses from Westminster suggest that they are pretty satisfied with the increased uptake of workplace savings with their auto-enrolment scheme. ITV reported a DWP spokesperson as saying: “Under the new state pension, by 2030 we expect that more than three million women will be getting an average of around £550 more each year compared to the old system.”
Sounds positive. But let’s all keep an eye on how things really pan out, so we can continue to hold our elected officials to account on this important matter.