Single mothers face £246k pension shortfall 

Single mothers face £246k pension shortfall 

Single mothers in the UK are facing a £246,000 shortfall in their pension pots compared to the average couple, which is being further exacerbated by rising inflation and falling wages.

A single mother has on average £29,000 of assets in her pension, versus £275,000 for a couple with children.

Of the some 1.7mn single mothers in the UK, 40 per cent are not even a member of a pension, according to Scottish Widows’ latest women and retirement report.

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“Single mothers are much more likely to be exposed financially, cutting back in ways that jeopardise their wellbeing,” said Scottish Widows managing director of workplace savings, Jackie Leiper.

“Despite increased reporting, stubborn gender pay gaps persist for women across the UK.

“Current economic conditions are making it harder than ever to fix the deep inequalities that underlie the pensions gap, with the retirement savings of women deeply impacted by key life events such as divorce or motherhood.

“Providers, regulators and employers must collaborate urgently to address this crisis– from reconsidering the auto-enrolment threshold to far greater investment in childcare support – to help the most vulnerable in the near term.”

Source: Scottish Widows' women and retirement report

According to the report, the average man aged 65 to 74 has over £250,000 of pension assets, compared to a woman who has less than £150,000. 

With women living longer than men, they need to be able to live off their retirement savings for longer.

Scottish Widows has calculated the average woman would need £85,000 more in retirement savings than the average man for a comparable quality of life in retirement.

This gap is partly down to substantially more women than men falling into lower income groups.

There are nearly 2.5 times as many men earning over £50,000 than there are women, according to the Office for National Statistics.

This income spread also varies across ethnicities.

Chinese women earn over 25 per cent more than White British women, whereas Pakistani women earn nearly 10 per cent less than White British women.

In addition, Black Caribbean women earn more than White British women (8 per cent), but Black African women earn 2.6 per cent less.

Cost of living crisis

Currently, wider macroeconomic factors such as the ongoing cost of living crisis are exacerbating these gaps in pension wealth.

Wage increases have not kept pace with inflation, meaning real wages have declined and eaten away at consumers’ spending power. 

The decrease in the real value of regular pay, excluding bonuses, was faster in May this year than at any point in the past two decades, according to the Office for National Statistics.

Inflation is compounding the issue of falling wages. Today (November 16), inflation rose to a 41-year high of 11.1 per cent.

In August, the Bank of England’s Monetary Policy Report estimated inflation will be 9.5 per cent in a year’s time. This means that on average, prices will have increased by more than 20 per cent over the course of just two years.