There has long been calls to address the gender pensions gap – in other words, the significant difference in pension savings and retirement income between men and women.
The numbers speak for themselves. Women retire with an average of £136,000 less in savings compared to their male counterparts.
The gender pensions gap can be broken down into multiple factors. Yet to truly grasp the issue, we can’t overlook the gender pay gap. Despite some strides, the reality remains: women in the workplace are receiving less income than men. Currently, eight out of ten firms with 250 employees or more still pay their male employees more than women.
Women are also significantly more likely than men to take career breaks. Societal pressure is still on women to take time off from work or reduce their hours in order to be a primary carer – for children in particular. This often leads to a reduction in pay and, as a result, a cut in pension contributions.
However, in recent times there have been increased efforts to bridge the gap. So, does this mean that pensions gender gap is closing?
Is it closing?
The simple answer: yes, somewhat, but not fast enough.
Men used to receive significantly more state pension income than women. However, that gap has almost closed for people reaching state pension age in recent years.
However, the gap for private pensions is much larger and taking a lot longer to narrow. The most recent Department for Work and Pensions data states that the private pensions gap stands at 35% – a reduction from 42% in 2006. While it’s positive that this number is narrowing, it’s apparent that it’s not fast enough.
The main catalyst for these recent improvements is the introduction of workplace pension auto-enrolment, introduced in 2012. Unless they choose to opt out, all eligible employees are automatically enrolled into their company pensions under the programme.
However, auto-enrolment can have its own detrimental impacts. Recent research by My Pension Expert on the workplace auto-enrolment found that 60% of women said they have not done any pension planning beyond making sure they’re enrolled into their workplace pension scheme. While auto-enrolment has been instrumental in getting people started on their savings journey, it can leave people complacent.
What can be done?
Businesses must evaluate their internal policies and create a plan to close the gender pay gap within their organisations.
Every business in the UK needs to make a commitment to tackling this problem. This means giving women the same chances for advancement and professional development and making sure they receive the same compensation for performing the same roles as men. Also, the government must address institutional issues like the need for greater childcare provisions.
There have also been calls to reduce the minimum earnings and age requirement for workplace pension auto-enrolment. This would allow people to start saving earlier, giving their pension pot a stronger foundation should they reduce working hours due to caring responsibilities.
Finally, more needs to be done to support female employees in understanding the possible advantages of raising their contributions, assessing the status of their savings, and engaging with their workplace pension.
That’s why it’s important that women have accessible routes to independent financial advice. Financial advisers can help people understand the current state of the pension savings, and how they can make sure they’ll have enough to live comfortably when they retire. An adviser will review the entirety of their financial situation, as well as their future goals, and develop an appropriate savings strategy. In doing so, women will be able to maintain regular retirement savings, thereby strengthening their long-term financial position.
Any improvement in the gender pension gap is positive. However, it’s alarming that it’s happening at such a slow pace. A greater concerted effort from the government, businesses, and financial services sector is needed to address these wider societal issues. In the meantime, women should consider seeking independent financial advice to make sure they have a solid retirement strategy in place.