The income gap between men and women in retirement has reached 38 per cent, more than twice the level of the gender pay gap, as women continue to be at a disadvantage in their later years.
Research by Trades Union Congress and Prospect found that this gap means retired women effectively wait for four and a half months each year until getting their pension, leading the union to name May 19 ‘gender pensions gap day’ — the day female pensioners effectively start getting paid.
Since 2015-2016, the gender pensions income gap has fallen by an average of just 0.7 percentage points a year, and at that rate it could take until 2074 to achieve pensions parity.
Ministers must act now, or we will consign more generations of women to poverty in retirement
Frances O'Grady, TUC
Big regional differences
In two-thirds of industries, women have accrued workplace pensions worth less than half as much as men, and in some industries, women’s workplace pensions are worth less than a fifth of those of their male colleagues.
There are several factors that make it harder for women to build up a workplace pension, the most obvious being the gender pay gap, which sits at 15.4 per cent.
But also, women are much more likely to take time out of work, or work part-time to look after children, and employers are not obligated to enrol low-paid workers into a workplace pension.
In addition, historic national insurance differences have led to lower state pensions on average for women compared with men.
The TUC urged ministers to urgently fix auto-enrolment and invest in childcare to improve retirement incomes for women.
Its analysis of Office for National Statistics figures found stark differences in average pension savings between men and women in most industries.
In 10 out of 15 industries the TUC looked at, the median private pension wealth for women was less than half that of men.
Women aged between 45 and 64 working in manufacturing, wholesale and retail, and other service sectors, have pension pots worth less than a fifth of their male colleagues.
The situation for female workers in administration and support services is even worse, with the average woman in this age group having accrued a pension pot one hundred times smaller than the average man in the same sector.
The research also revealed big regional differences, with women aged 45-64 in London accruing the lowest amount of pension wealth, at £12,600 on average.
The city also has the largest gender pensions gap at 75 per cent, followed by 67 per cent in the South East and 65 per cent in East England.
However, the smallest pensions gap was in Yorkshire and Humber with 27 per cent, followed by the North West with a gap of 37 per cent.
Policymakers ‘must reform system’
TUC general secretary Frances O’Grady warned the “whopping” gender pension gap could take more than 50 years to close.
She said: “Too many women are paying the price in retirement for taking time out of work or cutting back their hours when their children were small. Ministers must act now, or we will consign more generations of women to poverty in retirement.”
She urged the government to fix the pensions system so all women can benefit from a workplace pension with decent contributions from their employer, and to also invest in childcare.
Prospect senior deputy general secretary and TUC President Sue Ferns added that the government needs to firstly acknowledge the problem and ask the ONS to start benchmarking the gender pension gap.
The TUC said it wants a statutory requirement for ministers to report on the gender pensions gap, and an action plan on how to tackle it.
It said it also wants to remove the £10,000 auto-enrolment earnings threshold and axe the lower earnings limit so contributions are calculated from the first pound of earnings.
It also urged the government to find a solution to the issue of net pay — which means some low-paid workers do not get tax relief on their pension contributions — and create a timetable to increase statutory minimum employer contributions from the current 3 per cent level.
In response to the research, Amanda Latham, policy and strategy lead at Barnett Waddingham, said: “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. Now, the world has changed but the financial services infrastructure has not,” she said.
It is time to take this financial failure away from women, she added, calling for the consideration of fiscal, behavioural, and societal issues collectively, and work to “create a more robust and inclusive pensions framework that offers fairer solutions for all”.
Hymans Robertson calls for AE credits to tackle gender gap
Hymans Robertson has called for the creation of auto-enrolment credits in a bid to tackle the gender pensions gap, which would see the government paying pension contributions for people taking career breaks.
She said: “Policy makers 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 further consideration of moving to a flat rate of pension tax relief.”
Recent research by Barnett Waddingham found that 27 per cent of women are relying solely on their state pension to fund their retirement, compared with just 15 per cent of men. This worsens over the age of 55, when 35 per cent of women will rely solely on the state pension compared with 15 per cent of men.
Hymans Robertson this week called on the government to pay pension contributions for people taking career breaks through auto-enrolment credits to tackle the gender pensions gap. The consultancy said it also wants the auto-enrolment earnings threshold to be substantially reduced and the removal of the offset in qualifying earnings from the first £1.
