Research published ahead of International Women’s Day, which takes place on March 8, indicates that women are struggling to keep up with men in the UK when it comes to saving for their retirement.
The gender pensions gap has featured increasingly in pensions policy debates in recent years. It represents the percentage difference in pension income for female pensioners compared with their male counterparts.
According to Prospect, the gap fell to 37.9 per cent over its measured 2019-20 period, down from 40.3 per cent across 2018-19. It had previously risen for two years in a row.
The gap remains high and new studies further underline the difficulties women have been experiencing in saving for later life.
In order to improve pension savings rates among women we must stop penalising them at every turn
Romi Savova, PensionBee
Women have also been found to be twice as reliant on their state pension as men are, according to Barnett Waddingham.
The so-called ‘pink tax’, meanwhile, is obstructing women from investing in their long-term savings, according to PensionBee research.
The cost of being a woman was perceived by 14 per cent of female survey respondents to be hampering their ability to save into pensions.
Earlier this month, a group of companies across the pensions industry lobbied the government for the removal of the £6,240 lower earnings limit — the earnings threshold that allows employees to qualify for certain state benefits, including the basic state pension.
Aviva observed in an earlier submission to the Work and Pensions Committee inquiry on pension freedoms that this threshold disadvantages part-time workers — a group that is disproportionately made up of women.
Retired women in the baby-boomer generation, many of whom were part-time workers, appear ill-prepared for retirement compared with their male counterparts.
Women aged between 65 and 74 are retiring with average pension savings of £130,000, while men of the same age will retire with £260,000 saved, according to Scottish Widows.
More than a quarter of women reliant on state pension
The full basic state pension is currently £137.60 a week. It is available to men born before April 6 1951, and women born before April 6 1953.
Barnett Waddingham has called for policy intervention after discovering that 27 per cent of women are depending solely on their state pension, compared with 15 per cent of men.
It also revealed a widening of the pensions gap in later life, with 35 per cent of women over the age of 55 set to rely solely on the state pension, against 15 per cent of men.
Aviva’s research into the gap supports the picture of growing pensions disparity between men and women as they get older.
It found an 18 per cent gap in contributions between men and women aged 35 to 39. This gap consistently opened up as the age brackets ascended, hitting 40 per cent for those aged between 55 and 59 and 49 per cent for men and women aged 65 to 69.
“The UK pensions system is designed for a society which no longer exists; one where men went out to work and women stayed at home within a strictly nuclear family,” said Amanda Latham, policy and strategy lead at Barnett Waddingham.
“Policymakers must urgently prioritise reform, including reviewing the auto-enrolment rules to increase the minimum level contributions and remove the minimum earning requirement, change the state pension to better reflect career breaks, and move to a flat rate of pensions tax relief,” she added.
Moving to a tax relief flat rate of 30 per cent will normally increase a woman’s total amount of pension savings by 35 per cent, according to Barnett Waddingham.
The consultancy also called for the collection of data on people identifying as trans or non-binary, and for couples to be allowed to pay into each other’s pensions.
Being a woman is more expensive
Differences in the way society treats men and women well before they retire may also be having an impact on a woman’s ability to save for their pension.
According to a PensionBee survey of around 1,000 British savers, 14 per cent of women said the costs of being a woman, such as the inflated cost of basic consumer goods, was an obstruction to saving for retirement.
For women in their sixties and seventies, the choices are limited — carry on working or live a more frugal retirement?
Jackie Leiper, Scottish Widows
More than a fifth of women also cited the pressure to reduce paid work in order to take on caring responsibilities, compared with 14 per cent of men. Women make up three-quarters of all part-time workers, according to Scottish Widows.
“Consumer brands must urgently review their pricing strategies and make the necessary changes, whether that’s reducing the cost of goods aimed solely at women, or creating gender neutral products,” said Romi Savova, chief executive of PensionBee.
“In order to improve pension savings rates among women, we must stop penalising them at every turn and abolish the ‘pink tax’ once and for all.”
Structural barriers remain
More than a third of men believed the gender pay gap to be a barrier to women saving for their pensions, while 28 per cent of women agreed.
The significant gap in pension savings between male and female baby boomers is the outcome of structural inequalities, Scottish Widows said.
Three-quarters of UK part-time workers are women, while women earn on average 35 per cent less than men during their careers, the provider pointed out.
Current part-time workers are said to be unfairly punished by the lower earnings threshold for automatic enrolment.
In its submission to the Work and Pensions Committee, which was published in February, Aviva observed that employees working two days on the national living wage would currently only receive an employer pension contribution of 15p into their pension pot, or £7.80 a year.
Pension giants call govt to adopt AE expansion
Some of the UK pensions industry’s big beasts have joined forces to demand an expansion of auto-enrolment to capture young people, part-time workers and those on lower incomes.
This is because the first £6,240 of annual salary, or £120 a week, is not pensionable under auto-enrolment. Therefore, the lowest paid have the smallest proportion of their wage paid into their pension.
“Despite the progress that’s been made in recent years by getting more women to save adequately for their retirement, there’s still a mountain to climb to reach true pensions parity,” said Jackie Leiper, managing director of workplace savings at Scottish Widows.
“For women in their sixties and seventies, the choices are limited — carry on working or live a more frugal retirement?”
