We’ve still got a long way to go on equality in pensions finds Sara Benwell

woman baby

The annual LV= Cost of a Child report calculates the cost of raising a child from birth to 21 years old has reached an all-time high of £231,843 – more expensive than the average house. That’s scary enough, but more terrifying would be the thought that the money was being taken from women’s pension pots.

Unfortunately, according to a new report from gender equality charity, the Fawcett Society, that’s exactly what’s happening. Qualitative research carried out by the organisation found that outdated childcare practices could lead to women facing poverty in retirement.

The report discovered many women had cut pensions contributions to cover the cost of childcare or as a result of taking time out of work to look after children. Many of the women interviewed were regularly taking on the entire cost of childcare. Often these women were relying more on their partner for a secure retirement than they realised.

Sam Smethers, Fawcett Society chief executive, said: “Women are taking a big hit on their pensions when they have children, but are not aware of the impact this will have on them in the long-term.

“Women are putting everyone else’s needs before their own, especially when it comes to who pays for childcare. Their baby becomes her childcare bill.”

A better way

The Fawcett Society has made a number of recommendations to government – including converting unneeded childcare vouchers into pensions contributions and requirements for the industry to better communicate the dangers of ceasing pensions contributions when a parent goes on maternity or paternity leave.

Perhaps the most controversial proposal is that the partner who stays in work should top up their partner’s pension contribution if they take time off to care.

The report reads: “This is not about making women dependent but ensuring the true cost of having a family is shared between the couple and does not fall primarily on the main carer, who is usually a woman.

“Childcare should be seen as a joint cost so that it doesn’t just come from the mother’s salary. A woman should not be the only partner reducing or ceasing their pension payments because childcare costs make them unaffordable.”

Inequalities throughout the system

However, such measures would not solve the problem altogether, as even when you take children out of the equation women fail to save enough money into a pension. This holds true for women that earn the same as their male counterparts.

The gender pay gap, still at 13.9% for full time workers, becomes a 40% pensions gap in retirement.

Jackie Leiper, retirement expert at Scottish Widows, commented: “Despite similar levels of engagement between men and women in their 20s, this begins to drop at an alarming rate over the following decade.”

Education, education, education

One solution would be better education. So it is alarming to find that women are also less likely than men to take advice.

Data from the Pensions Advisory Service shows that over 60% of enquiries since the introduction of freedom and choice legislation are made by men. Their latest ‘Women and Pensions’ survey identified three factors that have the largest impact on behaviour: confidence, confusion and trust. 

More than two respondents in five (43%) admitted they didn’t feel confident in making decisions around saving for their retirement. This was most pronounced among those first starting out in their career (18 – 30) and those at retirement.

It would be a terrible thing if the women who were caring and providing for their children, were, through simple lack of education, sacrificing their futures at the same time. It is no better for women without children to miss out - simply because they don’t understand the importance of saving for retirement.

The Fawcett report should act as a wake-up call for government, industry and employers alike. It is time to start educating women about pensions.

This article originally appeared on Reward's sister publication website, Pensions Insight