Pensions gender gap worsening year-on-year as single mothers face £250k shortfall

Gender gaps in pay and pensions between men and women across the UK are worsening year-on-year, according to the latest Women and Retirement Report from Scottish Widows.

Its data shows that in pay alone, the average man earns £33,000 a year, compared to £22,800 for the average woman – a £10,200 annual difference, driven in part by pay stagnation and a growing median pay gap between UK men and women.

Women are also facing mounting challenges in preparing for retirement with some groups, like single mothers, already £246,000 worse off compared to the average couple.

This shortfall comprises all wealth including pension savings, which average under £15,000 for lone parents – almost 90% of whom are women. Expanding this figure to total assets, single mothers hold an average wealth of just £29,000, compared to over £275,000 for the average couple with dependent children in the UK.

This leaves nearly a quarter of a million-pound gap in total wealth between the two groups, and provides just one example of the mounting challenges facing women as they save for their future.

The report shows the uneven effects of cost-of-living increases are exacerbating structural inequalities, and negatively impacting the retirements prospects of most UK women.

The average man ahegd 65 to 74 today has over £250,000 of pension assets, compared to less than £150,000 for the average woman.

The gap is most pronounced among younger women in their 30s, with nearly one in five (19%) saying they are saving nothing at all - compared to just 12% of men this age.

16% of women across the UK said they have cut back on retirement savings to cope with rising prices, averaging a reduction of £1,824 per year. This figure has increased since March 2022, when only 10% of women said they were cutting back on their pensions.

In many instances, these missed opportunities to save for retirement will have lasting negative impacts. If a 40-year old single woman were to permanently reduce her pension contributions by £1,824, she could be £62,000 poorer by the time she retires, accounting for the projected investment returns that would be sacrificed.

The UK’s 1.7 million single mothers – equating to one in five households with children - are particularly vulnerable to these persistent inequalities, often balancing single income sources with additional costs and responsibilities of raising children alone.

Women who are single mothers for a significant portion of their working lives often go on to struggle in retirement. Research from Scottish Widows shows that women of all ages are less likely than men to be saving for retirement, but that this behaviour is particularly pronounced among single mothers: 40% say they are not a member of a pension, compared to 29% of women in general.

Even where single mothers do save into a pension, they often balance lower incomes with the increased financial pressures of raising children alone – which can require more time spent out of work. , Due to increased childcare costs, as well as housing and related-costs, single parent households typically spend more relative to their disposable income than couples – around 87% of their average disposable income, compared to over two-thirds (67%) for two-parent households, leaving them very little room to save. As women account for 90% of this lone parent group, this means single mothers are often more vulnerable to poverty in later life, particularly if they do not have a sufficient work record to maximise their state pension entitlement.

Jackie Leiper, managing director of workplace savings at Scottish Widows, said: “Despite increased reporting, stubborn gender pay gaps persist for women across the UK. Our research shows that single mothers are much more likely to be exposed financially, cutting back in ways that jeopardise their wellbeing.

“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.”