The ‘motherhood penalty’: How mums who work part-time are losing out on pensions

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Motherhood penalty: Women working part-time a reduced ability to save for retirement at the same level as men


The ‘motherhood penalty’: How mums who work part-time are losing out on pensions

  • Nearly four in ten women part-timers would work more if childcare was cheaper
  • Part-timers have a reduced ability to save for retirement at the same level as men

Punishing childcare costs are creating a ‘motherhood penalty’ that contributes to an ever widening gender pensions gap, new research reveals.

Many working mothers end up going part-time when they would prefer to continue working, simply because the sums do not add up. 

The research, published tomorrow by pension firm The People’s Pension, shows almost four in ten part-timers would choose to work more if childcare was cheaper.

Motherhood penalty: Women working part-time a reduced ability to save for retirement at the same level as men

The knock-on effect of shorter hours is not only lower pay, but a reduced ability to save for retirement at the same level as men. People’s calls it the ‘motherhood penalty’.

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

The report – The Gender Pensions Gap; Tackling The Motherhood Penalty – says that after having children, nearly half of women reduce their hours, more than a third leave work altogether while one in five returns to work in a lower paid role.

Gregg McClymont, director of policy at People’s and former Shadow Pensions Minister, says: ‘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.’

In England – similar arrangements operate in Wales and Scotland – there are three Government schemes that offer free childcare for children aged two, three and four. 

Parents can get 15 hours free childcare for two-year-olds (available for families on low-income benefits), 15 hours free care for all three and four-year-olds and 30 hours free for three and four-year-olds (if they earn a minimum of the equivalent of 16 hours per week at the national living or minimum wage and less than £100,000 a year each).

There is also ‘tax-free childcare’ worth up to £2,000 a year for qualifying parents where they receive a £20 top-up for every £80 they spend on care.

People’s has drawn up a list of measures it wants the Government to introduce to make childcare more accessible and affordable. Among them is a call for providers to be encouraged to turn vacant shops into nurseries – exempting the premises from business rates. 

It also wants the Government to reshape the auto-enrolment pension regime so it is fairer to low earners, many of whom are women. Currently, the first £6,136 of a worker’s earnings are not used to calculate pension contributions. If this threshold were removed, it would result in more money ending up in women’s pension pots.

 



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