Single parents facing wealth and pension crisis

• The average household wealth for single parents with dependent children is just £900, according to interactive investor analysis of ONS data
• That’s almost nine times less than the average for couples with dependent children (£8,000)
• The figures exclude pensions, property, and physical wealth (the value of household contents, possessions, and valuables)
• The average single-parent household with dependent children has a pension wealth of £24,000 - over four times less than the average for couples with dependent children (£97,000)

As Valentine’s Day approaches - a time when couples celebrate and look to the future together - millions of single parents across the UK are facing a starkly different reality: financial insecurity that could last a lifetime.

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New research by interactive investor, analysing the latest household wealth data (to the end of March 2022) from the Office for National Statistics (ONS), reveals that wealth accumulation and pension provision for single parents are ‘light years’ behind those of couples, leaving them at greater risk of poverty in later life.

Household wealth

The average household wealth (50th centile on table below) - excluding pensions, property, and physical wealth (the value of household contents, possessions, and valuables) - for single parents with dependent children is just £900. This is almost nine times less than the average for couples with dependent children (£8,000) and £2,300 less than that of single parents with non-dependent children.

Couples over the state pension age form the wealthiest household cohort, with an average wealth of £62,600, ahead of couples with non-dependent children (£25,000).

The nation’s poorest single parents (25th centile) with dependent children have an average wealth of -£1,200 - meaning they are £1,200 in debt. However, the nation’s poorest couples with dependent children have an even lower average wealth of -£1,500.

At the opposite end of the wealth scale, the wealthiest (75th centile) single-parent households with dependent children have an average wealth of £6,000 - almost £12,000 less than the average for the poorest couples over the state pension age with no children (£17,900).

This figure is also significantly lower than the average wealth of the wealthiest single-parent households with non-dependent children (£19,300), couples with dependent children (£42,000), couples with non-dependent children (£95,100), and couples over the state pension age with no children (£185,800).

Wealth by household type (to end of March 2022). Source: ONS/interactive investor. Includes household wealth apart from pension, property and physical wealth.

Pension wealth

A similar trend emerges when it comes to pension wealth. The average single-parent household with dependent children has a pension wealth of £24,000 - over four times less than the average for couples with dependent children (£97,000) and £34,000 less than that of single parents with non-dependent children.

The poorest single-parent households with dependent children have an average pension wealth of just £4,800, compared to £14,500 for single parents with non-dependent children and £34,200 for couples with dependent children.

Pension wealth by household type (to end of March 2022) Source: ONS/interactive investor.

Myron Jobson, Senior Personal Finance Analyst at interactive investor, says: “Household wealth among single-parent families with dependent children isn’t just lagging - it’s light years behind other household types. You might expect couples to have twice the wealth of a single person, but the difference is far greater, suggesting systemic issues that make it difficult for single parents to build wealth.  

“The financial burden of raising a family alone, coupled with lower earning potential and limited access to wealth-building opportunities, puts single parents at a severe disadvantage when it comes to long-term financial security.

“While dual-income households can build wealth together, single parents are often left treading water, struggling to save for the future.

“The wealth gap for single parents tends to affect women more, and the reasons are deeply rooted in both economic realities and societal norms. Women are more likely to take career breaks or work reduced hours to juggle childcare responsibilities, which stifles their earning potential and ability to save for the future. 

“Add to that the gender pay gap and the disproportionate number of women in lower-paid, less secure jobs, and it’s no surprise that their wealth and pension provision fall significantly behind other household types. The financial pressures of raising a child alone don’t discriminate by gender, and single dads can also find themselves falling far behind in savings and pension provision.

“The wealth gap between single parents and other households isn’t just a personal finance issue - it has major economic repercussions. With single parents struggling to build wealth, many are forced to rely more heavily on state support just to make ends meet. This creates a vicious cycle where limited savings and pension provision leave them vulnerable to financial shocks, increasing the demand for public assistance both now and in later life.

“If you are struggling with debt, it is worth consulting a debt advice charity such as StepChange or Turn2Us, which can go through all your options.”

How a modest increase in pension contributions pay off (for those who can afford them)

A relatively modest increase in your pension contributions today could make a significant difference to your pension pot over time, thanks to the power of compound growth.

For example, increasing your pension contributions by £50 a month - which would cost you £40 if you are a basic-rate taxpayer or £30 if you are a higher-rate taxpayer due to pension tax relief - could grow to £29,292 over 25 years, assuming a 5% return net of fees. This is because, in addition to investment growth, you also benefit from tax relief, meaning the government effectively boosts your contributions.

Myron Jobson says: “The earlier you start, the greater the potential impact. For those who can afford it, small, regular increases to your pension savings can build up significantly over the years, helping to secure a more comfortable retirement.”