When discussing financial equity, the gender pension gap can often get overlooked. On average women live longer than men so require a more substantial pension pot to ensure that they have enough funds to cover their life expectancy.

Reasons Behind the Gap

Caregiving Responsibilities

In the past women have tended to be the main caregiver supporting their families, resulting in working less hours and saving less for their pension.   Families are also in the position that due to high childcare costs, women are not returning to work as their wages would not cover the costs.  Women typically spend 10 years away from the workforce, to start families, care for children and other relatives.

Wage Disparities

Despite progress being made in closing the gender pay gap, there are still disparities in the salaries.  Women still earn less than men and this is still the case in the 30-40 age bracket, therefore the amount that women are contributing to their pension pot is not equal to the amount that men contribute.

Divorce Settlements

Pensions are being excluded in the majority of divorce settlements.  Couples tend to settle outside of court and offset the value of pensions against other assets such as the family home.  This can result in less of a share in assets as some pension schemes are more valuable than the property. With the no-fault divorces this could leave less time for parties to seek legal advice, therefore resulting in a disadvantage.  It is also the case that many women feel that they cannot afford legal advice but could be losing out on more by not taking the advice.  Some Solicitors offer free appointments that could help to understand legal and financial positions.  Employee Assistance Programmes often offer financial and legal advice.

Emerging Gaps

It’s not just older married women who have smaller pots, the gender pay gap already starts to appear in the 30-44 age group, which further highlights the need for earlier intervention.

What can we do to bridge the Gender Pension Gap?

Legislation changes

Removal of the Lower Earnings Limit (LEL) will result in lower-income earners being automatically enrolled into pension schemes.  This will allow over 3 million women to start contributing to their pension with employer’s matching the contribution.

Joint & Survivor Annuities

Women typically live longer than men and a considerable amount have small pensions savings.  For some couples joint and survivor annuities would ensure surviving spouses continue to receive a payment, which can provide peace of mind.  Couples can also structure annuities to provide a variety of payout options helping to manage future plans.  However, joint and survivor annuities can be complicated, with a low return so getting Financial Advice would be beneficial.

Awareness Campaigns

Scottish Widow’s Retirement 2023 Report showed that 10% of young women in their 20s have opted out of their pension and are missing opportunities to save early.  By the age of 22, 19% of men are paying into their pension compared to 14% of women. One factor impacting this is the cost of living crisis but also some are preferring to spend the money now.  Pension providers have started advertising on social media platforms like Tiktok to raise awareness to younger customers and encourage them to start paying into a pension earlier, particularly targeting young women.

Continue contributions during a career break

Aim to continue payments during a career break or increase contributions when returning to work to ensure that the deficit has been filled.  A large majority of people are not aware that they can contribute to someone else’s pension regardless of whether they are working or not.  For non-earning spouses a person can contribute up to £2,880 and if working contributions can be made as long as they remain below their annual allowance.  Using this option can help to fill the gaps in women’s pension contributions helping to increase their pension pot.

Policies

• • Regular audits of salary sacrifice policies and processes: Employers should pay particular attention to areas where employees encounter issues during family leave, especially for maternity.
  • Utilise family friendly policies such as flexible working, support the equal share of childcare through parental leave, shared parental pay and additional childcare provision.
  • Employee Financial Education: Employers should educate employees on the benefits of pension contributions, especially highlighting the long-term advantages for women.  Offer Financial advice and support through Employee Assistance Programmes.

 We can all play a part in reducing the Gender Pension Gap; women can take a more proactive step in making informed choices for their future, employers can offer more guidance/support through family friendly policies, the government can introduce impactful legislation changes and pension providers could market themselves and offer incentives to younger female audiences.

Let’s make a change to bridge the gap.

Reference: 2023 Retirement Report

Kirstin Brooks

Business Manager & Executive Assistant