Women today retire on pensions that are typically worth £136,000 less than men, according to the latest report about the gender pension gap.
Figures from the Pension Policy Institute and Now: Pensions show that women are retiring today with average pension savings of £69,000, while men of the same age will have a typical pension pot of £205,000 – almost three times larger.
The report estimates that in order to achieve the same pension pots as men, women would need to save for an additional 19 years on average.
The report identified a number of reasons for this problem: they reasons being the time women spend out of the workforce to raise families, often returning to part-time roles when their children are young. They also are more likely to reduce working hours, or stop work to look after older relatives.
The report says on average the women spend 10 years away from the workforce due to caring responsibility and this career gap equates to an average of £39,000 in lost pension savings.
It also cites problem around auto enrolment. While this has, as a whole boosted the number of people saving for retirement Now Pensions points out that women make up 79 per cent of the workers who earn less than the automatic enrolment earnings threshold of £10,000. This means that 1.9 million women in employment are not automatically enrolled into a workplace pension. If both age and earning thresholds were removed from automatic enrolment, an additional 885,000 young women in employment would become eligible for a workplace pension.
On top of this lower pay results in lower pension savings. The report also points to the spiralling cost of childcare is a hindrance to many working households, with the average cost of full-time nursery for a child under age two in 2023 being £14,800 a year, and in London the average annual nursery fees are £20,000 or more per child.
As a result of these different factors, by their late 50s, women will have built up just 62 per cent of the pension wealth of men.
This issue is contributing to poverty in retirement. Not only do women retire with smaller pensions than men, they typically live for around seven years long, meaning their pension wealth needs to go further. As a result two thirds of the pensioners currently in poverty are women, with single women making up half of this number.
Now Pensions director of policy and public affairs Lizzy Holliday says: “Policymakers have made important decisions in recent years which are already making a substantial difference to the way workers and their employers are providing for retirement.
“Yet, as our research shows, the scale of the gender pensions gap remains vast and will require bolder policy actions. Some of the solutions are broader than traditional pension policy. Childcare and gender pay gap issues must be given the urgent attention they require. But setting out the roadmap for the future of auto enrolment, including tackling the difficult issue of adequacy in retirement — which affects women disproportionately given lower pension wealth — should be front and centre of next steps.”
Pensions Policy Institute senior policy researcher Lauren Wilkinson says: “While the gender pension gap is widely recognised, there is a lack of clear consensus in terms of definition, magnitude and potential solutions.
“By their late 50s, women have average pension savings worth less than two-thirds of men’s, with a substantial proportion of this difference stemming from inequalities in the labour market, including differing working patterns and the gender pay gap. While there are some pensions policy options that could be introduced to potentially mitigate the gender pension gap, it’s unlikely to significantly reduce without changes in labour market conditions and gendered divisions of domestic labour.”
Responding to the report Fidelity International associate director Emma-Lou Montgomery says: “Closing the gender pension gap remains one of the biggest financial challenges that we face.
“The attention on this issue must now lead to action. At a policy and industry level we need to look at how pensions support the lives women lead. We need to address engagement levels, increase awareness of this very important issue and perhaps most importantly empower women and equip them with the tools to take steps themselves to bridge the pensions gender gap.”
Scottish Widows — which has produced its own report into women’s pensions for 15 years — says this underlined the need for action from policy makers. Scottish Widows head of policy Pete Glancy says: “Far more needs to be done to tackle the gender pension gap – our research says that right now, more than a third of women are not on track for even a minimum retirement lifestyle.
“Action must focus on putting the right measures in place for women to be able to stay in high-quality employment whilst raising families, including improving access and funding for childcare.“Pensions policy can also play a crucial role in helping lower-income women save. Without this, women in their 20s and 30s today could still be stuck in the pensions gap, left to face a real and unfair struggle in retirement.”
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