Women still face huge disparity in pension funding
THE gender pension gap is still vast, according to a Royal London report.
Others agree. Ten years on from its arrival in the workplace, the positive impact of automatic enrolment (AE) on savings behaviour is indisputable. Yet women are still the second-class citizens of the pensions’ world.
The insurance and pensions group states: “As the old adage goes, a rising tide lifts all boats. The introduction of AE in the UK has overhauled the pension savings landscape. Women now outperform men when it comes to participation rates among full-time eligible employees.
“However, despite the efforts to improve gender equality when it comes to both career opportunities and pension savings, you only have to scratch below the surface to reveal that the gender pension gap is still present. While the impact AE has had on UK pension savings can’t be overstated, it’s not been able to compensate for the structural differences in the workplace that ultimately limit the ability and means for women to save for their retirement.”
The problem is that significantly fewer women than men are likely to qualify for AE.
Of employed women in the UK, 38 per cent are working in part-time roles. Given the average earnings for part-time work is £6,922, women are less likely to meet the £10,000 eligibility criteria.
Indeed Royal London points to analysis by the Pensions Policy Institute – the median pension wealth for a female in her 60s was £51,100, whilst male pension wealth was near £156,500
“This staggering difference means women are left with less freedom, choice and room for manoeuvre when they approach and enter retirement,” it concludes.
The TUC maintains that in manufacturing, wholesale and retail, and other service activities, women aged between 45 and 64 have less than a fifth (19 per cent) of the pension wealth of male colleagues.
And in administration and support services the average woman in this age group has built up almost nothing.
General Secretary Frances
O’Grady said: “Women face a whopping pension gap. At current rates of progress, it could take more than fifty years to close.
“Too many are paying the price for taking time out of work or cutting back their hours when their children were small. Ministers must act, or we will consign more generations of women to poverty in retirement. We need to fix our pension system so that all women can benefit from a workplace pension with decent contributions from their employer, regardless of how much they earn.”
If they are not looking after children, then they are all too often caring for elderly relatives.
Insurance giant Aviva claims the gender pension gap begins to widen significantly from the age of 35.
“The gap between men and women’s pension contributions for 35 to 39-year-olds is 18 per cent. It increases to 23 per cent for 40-44-year-olds and 29 per cent for 45-49-year-olds. It then stretches to 35 per cent for 50 to 54-year-olds.
“This suggests a clear line in the sand around the age that women are often making milestone career and childcare decisions and opting to work part-time.”
What can be done?
Suggestions include addressing the £10,000 per job AE threshold, encouraging women to take charge of their own financial future by building confidence, and providing guidance and information at key moments during their working life, for instance, before going on maternity leave, to educate about the future cost of reducing or pausing pension contributions.
Other ideas take in fairer pension sharing on divorce, and making childcare more affordable.
However, the danger is that the current economic turbulence could make matters worse before they get better.