Women are reaching retirement age with the biggest pension savings gap on record, according to new research.
Women would need to work an additional 18 years in full-time employment to save an equal amount of pension as a working man, according to Now Pensions and the Pensions Policy Institute.
The report made use of data from two surveys that respectively questioned approximately 40,000 households and 10,000 households.
Pension policies and regulations have not kept pace with how many of us now live and work
Joanne Segars, Now Pensions
10.4mn women are ineligible for auto-enrolment
On average, women live four years longer than men, placing an even greater onus on retirement saving. Yet many fail to meet the criteria for automatic enrolment, denying them eligibility for employer pension contributions.
Joanne Segars, chair of trustees at Now Pensions, observed that 10.4mn women are currently ineligible for auto-enrolment. “Women make up the biggest proportion of part-time workers in the UK, and with reduced hours comes reduced pay,” she said.
“Millions of women have not been able to save via a workplace pension, nor take advantage of their employer contributions and the tax relief.”
The average UK pension pot has doubled to £111,600. Yet for women this has barely increased, as when taking into account the cost of living crisis and rising inflation, women are in a worse position.
The research further indicated that by the time women reach the retirement age of 65, they will have an average of £69,000 in their pension. This is £136,000 less than the average man, who would have saved £205,800 within the same timeframe.
The report indicated the differences in working patterns between men and women throughout their careers, with 27 per cent of women in full-time employment compared with 45 per cent of men.
Segars added: “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.”
Women leave the workforce in disproportionate numbers, in order to care for children, relatives and start families, which it has been observed contributes to both the pensions and gender pay gaps and allows for fewer opportunities for career progression and higher salaries.
An ‘outdated parental leave system’
Despite women’s employment being at its highest since records began (72.7 per cent), one in six women are currently ineligible for auto-enrolment.
More than 5.8mn women are working in part-time roles (38 per cent), meaning they might not meet the £10,000 eligibility criteria to be automatically enrolled into their workplace pension. The average earnings for someone working part-time is £6,922.
Joeli Brearley, founder of Pregnant then Screwed, said: “We will only close the gender pensions 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.
“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.”
Ben Pollard, chief executive of Cushon, commented: “There needs to be an emphasis on protecting women’s pension contributions while they are on maternity or care leave.
Auto-enrolled could accumulate £1.64mn pot over 70 years
An individual auto-enrolled on the average wage could accumulate a pension pot of £1.64mn over 70 years, according to Hargreaves Lansdown.
“Ideas to counter the long-term impacts of childcare duties on a woman’s pension might include asking employers to contribute while she is receiving maternity pay or is on maternity leave. Partners could be encouraged to pay into a woman’s pension during years of caring duties.”
“I would encourage the government to review the auto-enrolment earnings trigger to ensure more women, particularly low-earners, are automatically enrolled into workplace pensions,” he continued.
“Although lower earners have the right to proactively choose to join an employer’s workplace scheme, the success of auto-enrolment and the low opt-out rates of 8-11 per cent indicate the need to auto-enrol all lower-earning employees.”
