How has the pandemic affected single mothers’ finances?

According to research by Gingerbread, the single parents’ charity, 49% of single parents reported taking on more debt during the pandemic and the average amount of debt held by single parents increased by around 15%. This works out at about £600 more debt for each household. 

As 90 per cent of the UK’s 1.8 million single parent households are headed by women, the pandemic – and the corresponding increase in debt – has hit single mothers hardest.  

In addition, the combination of higher levels of part-time work, lower levels of pay and greater demands on their income as their household’s sole earner, means that single mothers can find it difficult to save adequately for retirement. 

Reduction in earnings, reduction in pension saving

New research conducted by NOW: Pensions and the Pensions Policy Institute (PPI) shows that since the pandemic around one quarter of single mothers have seen a reduction in earnings – their average annual income shrunk from £18,290 to £16,890. Those who were furloughed saw their pension contributions fall by an average of 25%.   

It also reveals that since the pandemic a further 9% of single mothers have been locked out of auto enrolment, meaning about 400,000 women are now missing out on vital pension contributions from their employer. 

We spoke to Kelly, a single mother, who had to stop her pension contributions during her pregnancy in order to get by. “Having a child is like having a second mortgage. Where others may be able to do overtime to help top up wages, that’s not an option we all have as we have to consider childcare. As a society I don’t think we’re very well educated about pensions and what they can do for our futures. So raising awareness is absolutely crucial.”

The COVID-19 childcare crisis

Our research also showed that during the pandemic single mothers have had to juggle work with household chores, with the Office of National Statistics (ONS) reporting that 67% of women took on additional home-schooling duties and spent 64% more time on housework. 

Because of the loss of childcare, single parents are around 50% more likely to be out of work than other types of family throughout the pandemic, again affecting their ability to earn and save. 

Farah Baldock, Head of Communications from Gingerbread, said: “The pressures of juggling work, caring for children and home-schooling with no external support has forced many single parents to reduce their hours of work or leave work altogether. Urgent support is needed to reduce the barriers single parents face in securing quality, flexible and sustainable jobs that work around their caring commitments – without this, single parents are at risk of being locked out of work altogether and this economic disadvantage will follow them throughout their lives.  It’s not right that such a large section of our society will continue to experience hardship well into retirement simply because they are single parents. More must be done to ensure they’re not left behind.”

NOW: Pensions’ policy proposals

By implementing some key changes to workplace pension saving, the government could help improve the financial future for single mothers.  

1. Removing the £10,000 trigger for auto enrolment in a workplace pension could bring another 400,000 single mothers into pension saving.
2. Ensuring pension contributions are taken from the first £1 of earnings would increase single mothers’ pension wealth by 52%.
3. The introduction of a family carer’s top-up would see the government pay the equivalent of the employer’s contribution at National Living Wage level into pensions for those women who are taking time out to care. This would equate to about £820 per year and would boost pension outcomes by 20% for women who take 10 years out due to caring responsibilities, then return to the workforce full-time. The family carer top-up could close the pension wealth gap created by taking time out of work to care for family by nearly half.
4. Greater action on the availability and cost of childcare to support parents who want to return to work. Despite tax changes that help families with childcare costs, prices continue to rise.   The Coram Family and Childcare Survey 2020 reports the cost of part-time nursery places for children under two have risen by 5%, (£138 per week, £7,000 per year), and for children aged two and over, it now costs 4% more.

Our five-point policy proposal aims to help tackles some of these challenges and help bring 2.5m more people – including 400,000 single mothers – into pension savings.