The pensions sector has been complaining about the gap in retirement pots between men and women for years. But nothing has changed.
According to a Just Group survey of Brits aged 55+, nearly one-in-three men (32%) had the financial foundation to leave work early compared to 16% women.
Poor health was responsible for 37% of women retiring earlier than they had expected, compared to 29% of men.
Also, the latest available figures from the Office for National Statistics (ONS) show that a women’s median pension pot stands at £48,500, which is still less than men’s 10 years ago at £49,300.
No update on government pension relief consultation
Change is needed. But what can be done to help?
Heather Owen, financial planner at Quilter, told Portfolio Adviser sister title International Adviser: “While it is right to celebrate just how far women have come in terms of gender equality in the UK, there are long roads ahead and the legacy of inequality echoes throughout many arenas.
“We know that women’s pensions are still dramatically below their male counterparts. This situation is not helped by an archaic pension taxation system, which means some women are disadvantaged.
“After much posturing, in July last year the government finally started to make headway on how to fix the discriminatory issue of net pay schemes versus relief at source as it launched a consultation. However, the consultation closed in October and there has been no update.”
Pension pot gap a byproduct of gender pay disparity
Tom Selby, senior analyst at AJ Bell, added: “In many ways, the gap in retirement wealth between men and women is a function of the gap in earnings in the labour market. Ultimately, until women gain parity in earnings with men, there will always be a gap in the amount saved for retirement too.
“Efforts focused on boosting the earnings of women will therefore be most effective in equalising retirement prospects. Provided these are effective, the gender pensions gap should be reduced over time.”
Steven Cameron, pensions director at Aegon, alluded to his firm’s recent research into financial wellbeing which found that in mixed gender households, women tended to be more focused on short-term family budgeting while men seemed to be responsible for longer-term financial planning.
“We are urging women who recognise these factors to take some time out to really think about their future selves, to discuss both short- and longer-term finances with their partner, and to see what they can do to put in place a financial plan including their retirement,” Cameron added. “With women, on average, living longer than men, they arguably need to be doing more, not less, to fund their retirement.”
Hope for next generation of women professionals
The pension gender gap could change in the future with the rise of career women.
Women in their 30s may have a bigger retirement pot than previous generations, as they increasingly become family breadwinners.
Helen Morrissey, pension specialist at Royal London, said: “Auto-enrolment has played an important role in bringing more women into workplace pensions but while women engage as much as men with their pensions earlier in their career the gap starts to widen from their mid-thirties when they are more likely to leave the workforce to take on caring responsibilities.
“Even if they do return to the workforce, it is often in lower paid, part-time jobs or else pension contributions fall by the wayside in favour of paying childcare costs.
“As long as this occurs, women will continue to get a raw deal when it comes to pensions and while the gender gap may narrow, it will still exist. The provision of good quality affordable childcare will be important in helping more women remain in the workplace and contributing meaningful amounts to their pension.”
AJ Bell’s Selby added: “The closing of the gender pay gap combined with automatic enrolment should help reduce the gender pensions gap over the coming years. The gap in workplace pensions participation has almost been entirely removed, although women are still more likely than men to work part-time on low earnings and thus not qualify for auto-enrolment.
“There will remain a time lag as those retiring today are from a generation where the earnings gap was significant, but I would expect and hope the gender pensions gap will all-but-disappear in the next 30 years.”
Aegon’s Cameron said: “Younger professionals, particularly if they’ve got onto the housing ladder, may find their 20s and early 30s are a time when they can pay a bit more into their pension, with the great benefit of these contributions having the longest period of compound growth.”
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