Discrepancies surrounding pension policy are nothing new in the UK – from changes to the lifetime saving allowance to the temporary suspension of the state pension triple lock.
And whilst the Government’s handling of such policies throughout the previous year have not been looked upon favourably – My Pension Expert’s recent research found that 87% of UK adults aged 40 and over have no faith in the Government’s handling of pension policy – it is fair to say that pension policy is being addressed in one way or another.
That said, there is one issue stirring the Government, and the pension sector in general, which is often overlooked – the gender pension gap.
Put simply, the gender pension pay gap is the percentage difference in pension income between female and male pensioners. As it stands, the pay gap sits at a shocking 40.3%, meaning that women could find themselves £7,500 worse off each year than men in retirement – and the gap is continuing to widen.
Such figures are particularly shocking – particularly in the wake of recent research from Age UK, which revealed that one in five UK women are now living in pension poverty. The question, therefore, is what is causing this escalating issue?
What causes the gap?
The pension gender gap is an incredibly complex issue. As such, there are various contributing factors.
Firstly, one cannot overlook the issue of the gender pay gap. As it stands, women earn 15.5% less than men; this essentially means that women will have less money to contribute towards their pension pot.
Further, women are three times more likely to take prolonged periods of time away from work than men. As such, women are more likely to step away from a workplace pension and consequently, miss out on employer pension contributions and pension tax relief.
The Department for Work and Pensions (DWP) may also have contributed to pension inequality. In September, it was revealed that the DWP underpaid retirees – most of whom were women – by over £1.1 billion in their state pension. Whilst it should be noted that men were also underpaid, most individuals affected were women, largely because they had outlived their partners and their state pension entitlement was not reviewed and amended in accordance with their changed situation.
All these factors are certainly worrying and, if left unaddressed, will only cause the gender pension gap to widen further.
What can be done?
As stated earlier, the pension gender gap is a complex issue. Therefore, there is no quick fix to this problem.
Clearly, the Government, as well as businesses, must commit to closing the gender pension pay gap. Indeed, ensuring that women have access to better opportunities to pursue senior roles within organisations, encouraging women to seek higher-paid roles, and making sure that men and women are paid equally for performing the same role will be vital in achieving this.
Further, the Government must address difficulties within the pension system itself and ensure that it is simplified and doesn’t disfavour women.
Whilst vital, it will inevitably take time to implement these changes – and even more so for women to see a noticeable impact on their retirement finances.
It would therefore be highly beneficial for women, who are worried about the state of their retirement finances to seek independent financial advice. For example, our team of advisers at My Pension Expert will conduct a thorough audit of a client’s current financial situation, as well as their retirement goals, and make tailored recommendations to suit their needs. Indeed, the solution will vary depending on the client; for some, building a varied investment portfolio may be the best route, whilst others may simply benefit from entering into a flexible access drawdown. The key is to seek advice sooner rather than later to counteract any potential financial shortfalls they may face in retirement.
The gender pension gap is a worrying societal issue and action from the Government and businesses is needed with immediate effect. However, as the UK waits to see ruling bodies implement change, the best option is to seek independent financial advice – doing so will help women to maximise their pension savings so that they can achieve the financially secure retirement they deserve.