Pension savings are set to be hindered by rising childcare costs which, according to new analysis, have been forced up in light of the impacts of coronavirus. Today, Coram Family and Childcare released their 21st annual chidcare survey, which revealed that prices have risen above inflation “once again”, in turn raising costs for parents.
Samantha Gould, the Head of Campaigns at Now: Pensions, commented on how these rising costs will impact pensions: “The research published today by the Coram Family and Childcare Trust is another blow to parents and may have a direct impact on their pensions savings, usually the mother’s, as they amend their working hours to care for their children as costs rise.
“Monthly childcare for a three-year-old was already more expensive than the average monthly mortgage repayment, so an increase of four percent in 2020 during a time when many families are less financially stable because of the pandemic is really concerning.
“We may see more women forced to reduce their working hours to care for their child to help cut costs.
“This will also be a huge hit to single mothers who have no option to rely on a partner and face the impossible decision of either working or caring for their children, which comes with significant long-term financial consequences.
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“Our gender pension gap research, which revealed that women reach retirement age with less than a third of the savings men do £57,500 to £203,200, found that the gap is predominantly caused by the differing work patterns between genders.
“Women are more likely to take time out of the workplace or work part-time in order to juggle other priorities such as childcare.
“Working part-time means that savers may not hit the auto enrolment eligibility criteria – AE is triggered only when an employee earns £10,000 or more.
“To balance this blow, we have been calling on the government to amend the AE scheme by removing the £10,000 trigger and allowing pension contributions to be taken from the very first pound.
The Investing and Saving Alliance (TISA) also called on the Governemnt to regularly review automatic enrolment rules going forward.
TISA called on Rishi Sunak to launch an initial formal review by 2023, reduce the minimum age to 18 and also remove the lower earnings limit to £6,240.
Renny Biggins, the Head of Retirement at TISA, commented on this: “To ensure that AE continues to be a success, we believe the framework needs to be reviewed periodically against a constantly changing backdrop including personal wealth, taxes and working patterns.
“For example, the number of multiple job holders is increasing. Many of these people who work multiple jobs do so part-time and are unlikely to reach the £10,000 threshold in a single employment to be auto enrolled. There is also the additional unintended consequence that many of the lowest earners will be hit by the net pay anomaly, meaning they will see their take home pay reduced by up to £64 a year.
“We urge the Government to undertake a formal review by 2023 and set a schedule for future reviews to ensure that AE is working for those it seeks to help the most.”
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