What Is The Gender Pension Gap And How Do We Close It

If you’re worried about the gender pay gap, just wait until you hear about the gender pension gap. Unsurprisingly, women don’t fare as well as men when it comes to the savings we’ve built up for a healthy and economically stable retirement. What may shock you, however, is just how far we fall behind.Research undertaken by NOW: Pensions and the Pensions Policy Institute last year revealed that the average woman reaching retirement age has £106,000 less in her pension than a man. That means our pension pots are ⅔ smaller than men’s and we’re reminded – once more – that when it comes to finance, it feels like we’ve gone back in time to the 1950s. We’re nowhere close to equality. So, why is the gender pension gap so large?The reasons for this gap are varied. Of course, the gender pay gap has a lot to answer for – women working full-time still earn almost £6,000 less than men. They have an average annual income of £24,150, compared with £29,980 for men.
The research conducted by NOW: Pensions also revealed that 47% of the gap is down to women reducing their hours, often for childcare. The burden of care, which so often falls on women, accounts for the fact that over 75% of part-time workers are women. How does this affect their pensions? Well, you have to meet a £10,000 salary threshold to be enrolled into a workplace pension – which many poorly paid, part-time female workers simply don’t. Because of this, there are 3 million women who are effectively locked out of workplace pensions. Why are single women the worst affected?Just when you think it’s getting really bleak, let’s throw one more depressing fact your way: the pension gap is particularly bad for single women.

Illustration by Chelsea Hughes

“Single women are the worst affected by the gap, especially when you look at single mothers,” explains Samantha Gould, PR and Marketing Manager at NOW: Pensions. “There are 1.8 million single parent households across the UK – 90% of these are headed by women. We’ve also seen how hard they’ve been hit by the COVID-19 pandemic. “Our research revealed that 68% of working mothers, like myself, rely on family and friends to support their return to work. During lockdown, this simply might not be an option. Many more women than men have volunteered to be furloughed just so they can care for their children. This will hugely affect their finances in both the short- and long term.”Single women also suffer from a financial capability gap – women statistically show far less financial confidence than men. In a study carried out by UBS, 63% of millennial women in the UK still admit to deferring to their husbands or male partner regarding long-term financial decisions, with 85% feeling that men know more about investing than they do.This isn’t just a sweeping generalisation. It’s reinforced in the way the financial services industry treats women. How many times have you been asked if an advisor can speak to your husband or father? Just look at how often financial services marketing appears aimed at men, who are encouraged to be ‘bullish, aggressive money-makers’ while you may find yourself pushed towards ‘family saving budgets.’ Does that seem weird to you? It should!
“I think the industry is too paternalistic towards women. They want to handhold and shelter them,” agrees Samantha. “There’s still that attitude in the way people in financial services speak to women. Men are encouraged to make money and be investors, whereas women are merely told to hold on to what they have, make do, knuckle down. We’re in the 2020s and not the 1950s!”Its why women will often find themselves deferring to their male partner, a choice that Samantha believes has a huge impact on women who typically outlive their partner, or who find themselves divorced or separated later in life.“We’ve seen a lot of women in this position who may have stayed at home and looked after children who were relying on their husband’s pension or their property and now can’t,” she says. “It’s a huge problem. These women are now facing old-age poverty – that’s not something we ever think will happen to us, but it so easily can. As someone who had a two-year career gap to care for my daughter, I’m all too aware of how this affected my own pension saving.”Don’t put off thinking about your pension…And that’s another thing. It’s not just the fact that women are hardest hit, it’s the fact that, as young single women, we often just avoid thinking about our pension. It’s a problem for another day, it’s unexciting and often frightening to think about yourself as old.It’s the biggest hurdle pension providers like NOW: Pensions face – getting us to consider our future selves. Samantha says, “It’s the crux of our marketing – reframing pensions away from a complicated process you can think about when you’re 60, and towards a move you should make right now to empower your future self.”Save, save, save“The most important thing you can do is understand that you must start saving as much as you can afford now,” says Samantha. She reminds us that the State Pension is unlikely to sustain us and may not even be there when we reach retirement age.She adds, “You should try to save 15% of your income a year. Under the government’s auto enrolment scheme, employers are obliged to contribute a minimum of 3% of your salary and you typically pay 5%. That’s an 8% contribution to your workplace pension. Some employers do pay more than the 3%, so you should look to match what they pay if possible. For example, NOW: Pensions as an employer pays in 10% so if you put in 5% you reach 15%. You may also benefit from tax relief from the government.“At any time, you can top that % up and a good way to start is immediately putting most of any bonus payments you receive into your pension. Don’t think of it as losing money now, think of it as gifting yourself money in the future.” Bring your pensions togetherThe next step is consolidating all your pensions. Most people work an average of 11 jobs in their lifetime, which can mean – confusingly – 11 different pension pots! Samantha recommends visiting the Department for Work and Pensions website, where there are helpful tools such as the pension tracing service which helps you find old pension pots. “Once you have a full picture of where all your pension pots are, you’ll be able to see your total pension worth and start budgeting for your future and the type of retirement that you want. Consolidating your pension pot doesn’t have to be complicated and combining all your pensions in one place will allow you to see your total savings more clearly. Each year there are billions of pounds worth of unclaimed pension savings – don’t let them be yours!”Samantha urges us to all be proactive about our pensions, to put more into our workplace pension when we can, speaking to our employer about how much they can put in, and also contributing to a personal pension too, if we can. And what about the factors we can’t control? “The NOW: Pensions team has a clear mission – to fight for a fair pension system that benefits everyone,” says Samantha, explaining that the pension provider works tirelessly to educate its clients on the importance of flexible working for female employees. She adds, “We’ve also lobbied the government to reduce the £10,000 threshold for auto enrolment. If it were removed, we’d be able to close the gender pension gap by 50% and increase women’s pension saving by 140%.”Although external factors affect the gender pension gap, it’s time we start working on the things we can do to help close the gap ourselves. Isn’t it time to debunk the myth of women as financially incapable? We need to be active agents in our finances.
It’s time for women’s pension power – let’s close the gap!

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.



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