Ryan FowlerA recent study by Phoenix Group has revealed that childcare costs are significantly affecting UK parents’ ability to work and save for retirement. A quarter (25%) of adults with a child under five have reduced their working hours, and a further 4% have left work entirely due to childcare expenses. This shift not only affects immediate income but also poses long-term consequences for parents’ retirement savings.
The research comes in the context of the government’s new childcare support package, set to offer 15 hours of free childcare per week to working parents of two-year-olds from April 2024. Despite this initiative, the burden of childcare costs remains a critical issue.
Women are particularly impacted, with the study finding that “women with a child under five were significantly more likely than men to reduce their working hours because of childcare responsibilities (36% compared to 15%).” This gender disparity underscores the unequal distribution of caregiving duties and its repercussions on women’s financial independence and retirement planning.
The prospect of increased childcare support has elicited positive responses from working parents, with 71% stating they would work more hours if they had access to free childcare. However, challenges in accessing formal childcare services persist, limiting parents’ ability to fully engage in the workforce.
Patrick Thomson, head of research and policy at Phoenix Group’s longevity think tank Phoenix Insights, comments on the findings: “Childcare costs can be crippling, and parents often face the dilemma of reducing working hours or dropping out of work entirely as they weigh up the benefits of working compared to paying childcare fees.”
Thomson emphasises the broader financial implications: “Alongside the immediate impact on take home pay, it is also important to consider how this can affect future finances. Most people saving in a workplace pension pay a proportion of their salary to their retirement savings alongside an employer contribution, so any decrease in earnings from working less can lead to reduced pension contributions.”
