A recent study conducted by Phoenix Group, the UK’s leading long-term savings and retirement entity, sheds light on the significant impact of childcare costs on working parents.
The findings reveal that nearly three in 10 adults with children under the age of five have been compelled to reduce their working hours or even exit the workforce due to the financial burden of childcare.
Particularly alarming is the disparity between genders, with 43 percent of women and 15 percent of men making adjustments to their employment due to childcare expenses.
The financial strain extends beyond immediate income, affecting long-term savings as well. Over a third of respondents in this group (34%) lamented that childcare costs have hindered their ability to save for the future.
Such sacrifices, the report underscores, could have enduring consequences for retirement savings, as reduced work hours translate to lower pension contributions or even exclusion from workplace pension schemes.
What about the government’s childcare support package?
The research, conducted in anticipation of the government’s childcare support package, which rolled out its initial phase in April 2024, reveals a glimmer of hope for many parents. Under the scheme, working parents of two-year-olds become eligible for 15 hours of free childcare per week during term time.
According to Phoenix Insights, the think tank arm of Phoenix Group, women bear the brunt of childcare responsibilities due to limited access to affordable childcare options, often leading them to opt for part-time work. Women with children under five were found to be significantly more likely than men to reduce their working hours due to childcare obligations.
The prospect of increased childcare support has been met with optimism by many working parents, with 71 percent expressing a desire to expand their working hours if granted access to free childcare. Boosting income to cover living expenses emerged as the primary motivation, closely followed by the opportunity to save more and pursue career advancement.
Challenges in accessing childcare
However, the report highlights challenges in accessing formal childcare, with one in six adults struggling to secure such arrangements. This difficulty poses a barrier to many parents hoping to increase their work hours and mitigate the financial strain of childcare costs.
Patrick Thomson, Head of Research and Policy at Phoenix Insights, emphasises the critical need for comprehensive solutions that address both the financial and practical aspects of childcare. He stresses the importance of expanding free childcare hours alongside measures to enhance the availability of formal childcare options. Moreover, Thomson advocates for employers to adopt more flexible working arrangements to accommodate parents’ childcare responsibilities and prevent them from feeling compelled to exit the workforce.
As the study illuminates the profound impact of childcare costs on parents’ financial well-being, it underscores the urgency of implementing supportive policies that enable working parents to balance their career aspirations with their childcare needs.
Additionally, the research delves into the dynamics of childcare arrangements during the workweek, revealing that while the child’s other parent or partner remains the primary caregiver for many, nurseries and grandparents also play significant roles in childcare provision.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
