Gender Pensions Gap continues

The new report from the Pensions Policy Institute revealed that the gap in pension value between men and women is still significant, with 67% of pensioners in poverty being women.

According to the report, a girl would need to start saving from 3 years old to match the pension of a man who began at 22, and a woman in her late 50s has approximately a third of the retirement savings of an average man of the same age.

This difference means that women are more likely to struggle financially in retirement than men. Even though the gender pensions gap shrank by 7% between 2006 and 2020, according to official figures, it remains a gender-based issue that continues to put pressure on the financial equality between the sexes to this day.

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Only this week, there have been protests by Women Against State Pension Inequality (WASPI) -  a voluntary UK-based organisation founded in 2015 that campaigns against the way in which the state pension age for men and women was equalised. They call for the millions of women affected by the poorly communicated change in pension age for women to receive compensation. The Parliamentary and Health Service Ombudsman ruled that those affected should be compensated. Depending on the numbers affected, the total bill could end up being in the billions of pounds – more than £10bn if all women born in the 1950s are compensated. The Prime Minister's spokesperson said that the Government would be taking time to consider the report, and it is unclear whether any actual payout will take place.

What is the gender pension gap?

The gender pension gap is the difference in pension savings, and then retirement income, between the genders. The research shows that men have substantially larger pension pots than women as they approach retirement, resulting in a significant difference in retirement security between the genders.

For men and women just beginning their career, the gender pension gap doesn’t exist. After all, we all start with an empty pension pot. Then men gradually take the lead until their early 30s where the gender pension gap actually shifts in the other direction – for those eligible for auto-enrolment – with women having larger pension savings than men.

After 35 is where the real gender pensions gap begins to emerge in favour of men. There is a 10% gender pension gap between the ages of 35 and 39. By late 40s, this has expanded to a huge 47%, according to the Government’s Gender Pensions Gap report.

Why does the gender pension gap exist?

There are a number of factors that contribute to the startling gap between the genders in pensions wealth.

Firstly, the gender pay gap, which naturally contributes to the difference due to women taking home less pay on average and therefore contributing less into their pensions. 

Women historically perform the bulk of unpaid labour in society. For example, women are more likely to put their careers on hold while raising a family and they are more likely to work part-time, especially during the initial period of parent life. Data from the Office for National Statistics (ONS) showed that 38% of women were working part-time compared to just 14% of men in 2022. And while this is changing, with paternity leave becoming more common, it remains that women statistically are the ones that sacrifice their hours, and therefore their pensions contributions, in order to help raise a family. 

Additional factors at play that contribute to the pensions gap include: career paths, gender pay discrimination, how pensions are split following divorce, to name but a few.

But the bottom line is, if you’re a woman, you’re statistically more at risk of having significantly less pension wealth than you should for a healthy retirement.

The key to avoiding these shortfalls is to plan in advance. Considering how all of these factors can affect your pension wealth down the road, planning accordingly can go a long way to mitigating some of these inherent disadvantages. Specifically, a female-focused retirement planning approach is the most effective way to secure a comfortable retirement.

If you’d like to find out more about how to navigate potential pension shortfalls, or are simply interested in finding out more about how you can best plan for the future of your pension, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with one of our experts to find out how we can help.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.