The pensions gender gap is being widened by the cost of childcare as women pay the ‘motherhood penalty’ when having children, The Peoples Pension (TPP) has found.
In its report, The Gender Pensions Gap; Tackling the Motherhood Penalty published today, 13 May, almost one in four women working part-time would choose to increase their hours if childcare was cheaper, a problem which is being exacerbated by the current policy.
According to the provider, the average female pensioner is £7,000 a year poorer than her male equivalent, more than double the total gender pay gap.
To help tackle the inequality, TPP has suggested a number of measures including cutting the required earnings to be eligible for an auto-enrolment pension, which disproportionally affects women, abolishing the net-pay anomaly and an “earmarked grant to local authorities” to help cover the cost of childcare.
TPP director of policy, Gregg McClymont, 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.”
The survey, which questioned 2,000 mothers across the UK, found that 44 per cent of women reduced their hours, a third (36 per cent) left work altogether, while 15 per cent returned to work in a lower paid role.
As a result, women are likely to reduce their pension contributions, miss out on employer contributions as well as investment gains.
Of those that left their role, 43 per cent said it didn’t make sense to keep working and pay childcare, while 29 per cent said they could not afford suitable childcare.
Of the women who reduced their hours, 36 per cent said it made financial sense to reduce their hours after having children, while 23 per cent could not afford suitable childcare.
“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,” McClymont added.
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