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Women are dealt bad cards when it comes to occupational pensions, and there is little to no evidence of their pensions being ‘levelled up’. New research shows women would have to accumulate a pension from age four to achieve pensions equality, as they reach retirement age with the biggest pension savings gap on record.
Women would have to work full-time for an additional 18 years to close the gender pensions gap, the Pensions Policy Institute and master trust Now Pension have found. Women will on average have accumulated £69,000 at age 65, compared to men’s £205,800; and although the average UK pension pot has almost doubled to £111,600, women’s savings have barely increased. Source: Now Pensions/Pensions Policy Institute
The inequality is not just to do with labour market inequality – and perhaps a lack of political will to change this – but also with the design of the pension system itself. The research noted that one in six women is currently ineligible for automatic enrolment into a workplace pension despite women’s employment rate being at its highest since records began (72.7%), increasing their risk of pensioner poverty. As women live on average four years longer than men, this means they need to have saved more than men to close the gender pension gap.
Joanne Segars, chair of trustees at Now Pensions, said: “Pension policies and regulations have not kept pace with how many of us now live and work, especially since the Covid-19 pandemic. That is why we have been lobbying the government to fix these inequalities and enable ‘under-pensioned’ groups the same opportunity to build their retirement pot as others enjoy.”
The motherhood penalty is alive and well
Inequality is exacerbated when women have children due to the difficulty of combining paid and unpaid work in the UK. The research found that just a quarter (27%) of women in the UK work mostly full-time throughout their careers, compared with 45% of men.
The researchers note that women spend an average of 10 years away from the workforce to start families and care for children and relatives. The dual responsibilities of many women also show in their work patterns; more than 5.8m women work part-time (38%), putting them at risk of not meeting the £10,000 trigger for automatic enrolment; the average earnings for someone working part-time are at just £6,922 a year.
"Flexible working is the number one way that we will close the gender pay gap. So, the idea that women are being penalised in later life by the gender pensions gap for working flexibly and therefore being able to work at all is exhausting,” said Anna Whitehouse, author and founder of Flex Appeal.
“If women did not work flexibly and take on caring responsibilities, the economy would crumble. That this additional penalty is falling on women when they are at their most vulnerable is beyond cruel. We need to start supporting women; we need to level the playing field, and we need to start to close these gaps before things get any worse."
The cost of childcare is singled out by the researchers as a major obstacle, as this now tops the average cost of a mortgage.
Joeli Brearly, founder of campaign group Pregnant Then Screwed, also singled out the parental leave system as a contributor to labour market inequalities that are felt in retirement.
'We will only close the gender pension gap when women have equal access to the labour market. Our outdated parental leave system ensures that it is almost always women who take time out of the workforce to care for their children and this unequal share of the care work continues for many years,” said Brearly.
“Meanwhile, we have the most expensive childcare in the world as a proportion of a mother’s earnings, resulting in hundreds of thousands of women reducing their hours or leaving the workforce altogether as it doesn’t make financial sense to continue working. If the Government were to invest in childcare and parental leave, we would undoubtedly see the gender pay gap and the gender pensions gap reduce, resulting in fewer women and families living in poverty,” she added.
Why is the government so reluctant to tackle the gender pensions gap?
