The gender pay gap has finally been getting some of the recognition it deserves, but the issues sadly don’t end there. In fact, there is a gender pension savings gap too.
Data from the Department for Work and Pensions shows the income of women currently in retirement is, on average, £42 per week lower than for men. Over the course of retirement that could equate to over £40,000, and based on current savings trends, the difference is only set to get worse.
But what can be done to bridge this gap and help give women financial security in the future?
Mind the gap
Whilst the gender pay gap has narrowed in the past 20 years (according to the annual snapshot of earnings from the Office of National Statistics), there is still an unacceptable difference in the number of men in senior high earning roles compared to women. Although the gender pay gap reporting is attempting to challenge this, it’s too soon to tell its true impact. But the gender pensions gap doesn’t start and end with earnings. The problem is exacerbated by the fact that there is a gender pension savings gap of 54%. Men, on average, hold personal savings for retirement of £162,400 compared with just £73,900 for women (across private pots and occupational defined contribution (DC) and defined benefit (DB) pension schemes).
This can lead to a knock on effect with financial confidence. When it comes to living comfortably through retirement, research published by LifeSight on retirement expectations found that only one third of women are confident that they have enough resources to live comfortably compared to almost half (49%) of men. The research also highlighted that saving for retirement is not a top financial priority for women.
Understanding the implications
As minimum pension contribution requirements set by the government through auto enrolment have increased; some reports estimate that the rise could take a fifth of the average employee’s available spend from 2019. The intention for the rate rises are to try and help everyone save more adequately for future financial security. However, for many, this will add additional financial pressure and increase the risk that – particularly younger workers – may opt-out of workplace pension schemes altogether. In the long run, this could be harmful to their retirement savings, and prolong the number of years before being able to afford to retire.
In order to ensure individuals don’t make knee-jerk decisions in light of the increased contribution levels, more should be done by employers and their pension providers to help individuals understand the benefits of workplace pensions and long-term saving towards their retirement. Jargon-free communication is a good place to start, supported by online, easily accessible tools that help explain the financial implications of any potential decision making– for example the impact changing how much you save in to your pension each month could have on the age you can afford to retire.
How to narrow the gap
The pension industry can help by offering better communication around women’s specific life paths, helping them to understand the impact of part-time work, career breaks and the best way to plan for them when it comes to their retirement savings.
When it comes to the tools available to help women better understand retirement positions, research suggests only 8% of women frequently use the internet or mobile apps to access information on their retirement plans. This is compared to 37% for banking or credit cards and 18% for savings and financial investments, highlighting the need for employers and pension providers to focus on increasing engagement with retirement savings and awareness of the tools that can support women to achieve their savings goals.
There is much to be done to tackle issues contributing to the pensions gap, but ultimately, when it comes to accumulating pension savings, the best approach is to start saving early. With so much uncertainty and confusion in the pensions field, this is the surest way to protect against poverty in retirement for everyone, regardless of gender.