The gender pay gap has become one of the biggest personal finance issues in recent times. Kick-started this year by new rules requiring companies to disclose the average salary difference between their male and female employees, the revelation of significant disparities at high-profile companies such as the BBC has pushed the issue up the agenda.
With the state pension ages for men and women having been aligned, the gender pensions gap is now becoming a bigger talking point. “The pension gap is about twice the size of the pay gap. If the gender pay gap stands at about 16 to 18 per cent, the gender pensions gap is more [like] 40 per cent,” says Maike Currie, investment director at Fidelity International.
Other statistics are similarly damning. According to the Chartered Insurance Institute, women’s pension wealth at age 65 (£35,800) is a fifth of their male counterparts’. A report by Zurich has shown that women in drawdown have 37 per cent less income, while research by AJ Bell has found withdrawals made by women under pension freedoms are less than half those made by men (£4,100 compared with £8,500).
Jane Portas, partner at PwC and head of the Women’s Risks in Life section of the Insuring Women’s Futures task force, emphasises that the gap is a basic consequence of salary disparity. She says: “Pensions in the UK are tagged to earnings, so the gender pensions gap will always be greater than the gender pay gap, generally speaking. That’s because lots of pension arrangements are based on employee and employer contributions, and then of course there’s a tax relief, so you can see how that rolls up.”
The problem, however, is not national, but global. According to research by insurer Swiss Re, the gender pensions gap in Switzerland is 37 per cent, 39 per cent in France, and 47 per cent in Germany.
The situation in Australia, home to a much-lauded ‘super’ retirement plan, offers little contrast. The Australian Bureau of Statistics found the average superannuation balance for those approaching retirement, deemed as 55 to 64 years of age, was A$196,000 (£108,050) for women and A$310,000 for men.
A further concern is the pace at which the gap is widening in the UK. Research by Royal London published this spring found that the divide had almost trebled in 10 years, to £85 by 2016-17 from £31 per week in 2006-07.
In recognition of the problem and in a bid to address it, a number of initiatives have been formed. A report by Fidelity, ‘The financial power of women’, notes the World Economic Forum has predicted it will take 217 years to achieve gender pensions parity, globally. But domestically, other factors look set to exacerbate the problem, in the short term at least.
On November 6 2018, men and women received their state pension at the same age for the first time in 70 years. The government’s decision to equalise the state pension age for both men and women has been met with fierce opposition, most notably from Women Against State Pension Inequality, the campaign arguing that the speed of implementation has left a cohort of women out of pocket and unable to make alternative plans.