Gender pay gap reporting has helped to shine a light on the disparity between men and women’s pay. But, the gender pensions gap is often overlooked.
According to the Wealth & Assets Survey, over a million women in their 50s have no private pension wealth and will be entirely reliant on the state pension in retirement. The survey also shows that there are 50% more women than men heading towards retirement without any savings of their own.
Women that do have their own pension savings have from less set aside than men and this gap is evident at every age as the table below shows.
For those in their early 60s, the gap is biggest with the average woman having saved just a third of the amount of a man the same age with women having £51,100 compared to men who have £156,500.
Average pension wealth
Source: Wealth & Assets Survey
As women live, on average, 3.7 years longer than men, to draw the same pension income throughout their retired lifetime, women actually need to have saved around 5% – 7% more than men.
What’s causing the gap?
NOW: Pensions has commissioned the Pensions Policy Institute to look into this issue in more detail and the findings of this research will be published next month.
But, it’s evident that there are a number of factors at play. The persistent gender pay gap has a direct correlation with the amount being paid into pensions. In addition to that, women are much more likely than men to work part time or take career breaks to raise children or care for relatives.
1.2 million mothers with dependent children are currently taking time out of work to look after their family and are missing out on pension contributions as part of automatic enrolment.
This has a significant impact on women’s ability to save at the same level as men. For women that take a five-year career break, they will accumulate a pot which is £33,986 – 33% smaller than male counterparts.
How can the gender pensions gap be bridged?
Closing the pension gap will require society to both close the pay gap and address some of the structural issues that magnify the effect of lower pay for women. For example, removing the £10,000 auto enrolment trigger would bring 2.5 million more women into pension saving. Similarly, removing the lower earnings band from the auto enrolment calculation would benefit all savers but be particularly advantageous to women.
A policy targeted at people not in paid work could significantly improve retirement outcomes for women.
Taking time out to care for children or elderly relatives has long term implications for pension saving. This is compensated for in the state pension through National Insurance Credits but there’s no equivalent for workplace pension savers.
One solution to this would be for government to pay an auto enrolment credit to those eligible who are taking time out for caring.
Closing the pay gap and supporting women to participate fully in the economy are essential first steps to closing the pension gap but it’s important to fully consider reforms that could be made to improve outcomes for women. It’s time to shine a light on the gender pensions gap.
Amy Mankelow, Director of Communications, NOW: Pensions