The gender pay gap doesn’t just end when we retire. In fact, it just morphs into the gender pensions gap, where women can expect a pension fund that is, on average, £106,000 less than a man’s.Charming.One of the primary reasons for this is our outdated caring model; where women are still statistically likely to be the caregiver for both young children and elderly relatives. It’s why a shocking 54,000 women a year fall out of the workforce due to having children, and why 77% of working mothers say they earn less now than before they had children.
This, understandably, is one of key drivers of the gender pay gap and has a profound knock-on effect when it comes to women’s finances, and, of course, their pensions.“When it comes to the gender pensions gap, 47% of the gap is down to women reducing their hours, often for childcare,” explains Eleanor Levy, from workplace pensions provider NOW: Pensions, which has been undertaking detailed research on this issue.The part-time pensions penalty
Illustration by Chelsea Hughes
Eleanor explains that, because the way women work is affected by the caring responsibilities that disproportionately fall on them, it causes what NOW: Pensions is calling The Part Time Pensions Penalty.
She says: “One of the most shocking stats is that three-quarters of part-time workers are women. So then if you look at how people get enrolled into a workplace pension, that you must be at least 22 and earn a minimum of £10k, you immediately lock many of these part-time workers out. In fact, it excludes 3 million UK women from workplace pensions. We call that The Part Time Pensions Penalty. We have spent a lot of time lobbying the government to remove that threshold. If it was removed, we would be able to increase women’s pensions savings by up to 140%.”Recognising working mumsBut of course, it’s more than just removing that threshold – it is recognising the way in which working mothers work. Their day is not a strict 9-5. There is a commute made longer each way by possible child pick-ups and drop-offs. Many working parents will frequently have to leave work early, or even just on time, and the stigma attached to that – for both men and women – is sizeable.If flexible working was normalised, Eleanor believes it would drastically reduce the financial penalty caused by women having to reduce their hours.“I am convinced that flexible working is one of the biggest keys to fixing this problem. If we can make it remote working full time – even better. Realistically, we need to make this easier for women and for all parents. Recent statistics show that 60% of unemployed parents in the UK were out of work because they couldn’t find jobs with flexible working,” she explains. “Flexible working hours reduce the stigma too many parents face with trying to juggle work and childcare.”
Working for yourself – the ultimate flexibility?Of course, a lot of women choose the ultimate flexibility with their work – freelancing or working for themselves. What do these women do for their pensions?Though they lack the safety net of a workplace pension, Eleanor urges self-employed women to still take their pension responsibilities seriously.She explains: “There are still a lot of options out there – a personal pension, a SIPP (self-invested personal pension) or a stakeholder pension. Lots of self-employed people have irregular income patterns so they need to choose a provider that will allow them to make contributions as and when. There are lots of great, free advice websites out there to help you choose the right one. The Money And Pensions Service is a fantastic resource. I would definitely suggest people really look into that.”The flexible working revolution is happening nowThough living through a pandemic is hardly ideal, one of the surprising silver linings of this time is how it has normalised flexible working. “It 100% shows that flexible working is possible,” says Eleanor. “Businesses will start to question outdated thinking around productivity – that it is best achieved in fixed hours in an office building. The ability to work remotely gives people that much-needed commuting time back. It shows that you can do a day’s work but also pick up kids from nursery. Some of the things businesses used to say as excuses, like reduced productivity and the expense of setting up a home office for employees, are just not going to fly any more.”One of the things this time has also achieved is a thorough debunking of the myth of ‘presenteeism’; that you have to be seen to be doing work to be doing it. This often affected employees who were already working flexibly, many worried that their colleagues in the office may question their work ethic if they were working from home. There’s that stigma again. But now we’re all doing it; it’s a watershed moment for the flexible working revolution and one that can only positively impact women… and their pensions. The very simple key to helping your pension pot grow is, of course, saving. That is something that, for those lucky enough not to have been too detrimentally affected by Covid-19 financially, is a new possibility. In fact, the Money And Pensions Service’s report about Covid financial wellbeing in May 2020 showed that 40% of people think this is a very good time to be saving, and that the saving ratio across Britain has increased due to a lack of ability or opportunity to spend.Additionally, a Lloyds Bank and YouGov survey last year showed that commuting takes an average journey time of 65 minutes each day. Commuters are set to spend around 70 weeks’ worth of time (492 days) travelling for their job during their working life, at a total average cost of £37,399. Imagine having saved £37,399 more into your pension pot for when you stop working.“There are so many savings people can make right now – no commutes, no gym memberships,” agrees Eleanor. “People have been forced to change many of their daily habits during lockdown. How many of us would usually grab a morning coffee before reaching the office? If people can maintain some of these changes, they will hopefully find new pockets of money they didn’t have before and it’s a good idea if they put that money into their pensions. If you move jobs and you’re lucky enough to get a pay rise, that is a perfect time to put it into your pension as it’s money you didn’t really have before.”
And, of course, Eleanor adds: “If flexible working continues to be the norm, just think how much money women could be saving!”
NOW: Pensions is on a mission to fight for equality in pensions. Visit FairPensionsForAll.com to find out more.
NOW: Pensions’ (or any of its representative’s) advice or opinion on any specific facts or matters are information and opinions for general information purposes and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. This article is not intended to be relied upon by the reader in the making of any financial decisions, and does not constitute financial or professional advice. You should seek your own professional advice.