Childcare extension highlighted as 'huge contribution' towards closing gender pensions gap

Industry organisations have welcomed the government's plans for additional childcare cost support, arguing that this will be a "huge contribution towards closing the gender pensions gap".

In the Spring Budget, Chancellor, Jeremy Hunt, announced plans to give 30 free hours of childcare per week for eligible working parents of children aged 9 months to 3 years, with the plan to be rolled out in phases from April 2024.

Pensionbee director of public affairs, Becky O’Connor, argued that this will make a "huge difference" to parents’ ability to stay in work, arguing that this should in turn help to not only boost mothers' career prospects, but also help reduce the gender pay gap and the gender pension gap.

She stated: "Previously, there was a significant gap of two to two and a half years between when a parent would have to go back to work after parental leave and when help with childcare costs would kick in.

“Staying in work for those two years could boost the eventual private pension pot of a parent on an average salary by around £12,000 (£205,000 rather than £193,000). With the impact of better salary progression factored in, this boost could be even greater.”

This was echoed by Smart UK CEO, Jamie Fiveash, who also welcomed the extension of free childcare, stating that more funding for early years childcare means greater workforce participation for parents and carers, particularly women, giving them the chance to build a healthy pension pot.

He continued: "Lone parents are likely to be the biggest beneficiaries of the free childcare extension, having some of the lowest employment rates in the UK, at 66 per cent.

"The gender pension gap is a ticking time-bomb for policymakers, and this gap has widened with the increased cost of living and soaring childcare costs.

"Action is required to address this gap and this announcement on free childcare, although phased, will be a cornerstone to bridging the gender pension gap when it’s at full implementation."

Indeed, Scottish Widows managing director, Jackie Leiper, argued that the extension is a "huge contribution towards closing the gender pensions gap and will provide much needed financial relief to many women and families in the UK".

"However," she clarified, "other priorities still remain – equalisation of parental leave for men and women, pensions on divorce and prevalence of single life annuities being purchased by men.

“Our research shows that young women need to save an average of £185,000 more during their working life to enjoy the same retirement income as men. The gap remains broad and more is needed to close it.”

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