PensionsMar 9 2023

Gulf of inequality: Little progress on women’s pensions gap

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Gulf of inequality: Little progress on women’s pensions gap
New research from trade union Prospect estimates the gender pensions gap at 40.5 per cent for 2020-21.

New data from HM Revenue & Customs, released on March 8, left little to celebrate on International Women’s Day, as it showed that women are still earning considerably less than men at every stage of life.

Across all ages groups, the median income was £28,700 for males and £23,600 for females – a huge gap of 20 per cent. This disparity widens further as workers approach middle age. 

In terms of high earners, men earning in excess of £1mn outnumber women by almost 10 to one (17,000 men compared with 2,000 women). That ratio falls closer to five to one (18 per cent) for those earning more than £500,000.

It’s time for employers to embrace equity, recognise the differences across their spectrum of employees, and respond with the support that delivers equal outcomes Francesca Steyn, Peppy

More than 1mn men earn in excess of £50,000 more than women.

The data also showed that women are out of the workplace or earning considerably less during the years they are most likely to have young children. The only place women outnumber men is at the lowest levels of income.

“These latest figures reiterate the dire need for government action in boosting women’s finance,” said Quilter tax and financial planning expert Rachael Griffin. 

“At present, there is a significant gender pay gap during working life, and women will only suffer further when it comes to retirement as they simply will not have had the opportunity to build a good enough pension pot.

“What’s more, they also risk missing out on state pension funds if they have not achieved the full 35 years’ of national insurance contributions following the introduction of the new child benefit rules in 2013.”

Limited prospects 

New research from trade union Prospect estimates the gender pensions gap at 40.5 per cent for 2020-21.

This represents an average shortfall of £7,100, significantly more than the gender pay gap, and remains essentially unchanged in the five years since Prospect first estimated the gap.

More worrying is that current government policies are failing to provide any improvement, despite a clear increased focus on the subject. 

The data is published in its latest annual gender pension gap report, in which it warns of a “ticking gender pension time bomb” if radical action is not taken to address the gap.

“This report shows that the gender pensions gap remains extremely high,” said Prospect senior deputy general secretary Sue Ferns. 

“Prospect’s number one ask of government has been for them to produce an official definition of the gender pensions gap and to report on it centrally. Progress has been made on that but we now need warm words to be matched by concrete action.

“Things are moving far too slowly. We are currently condemning generations of women to significant financial inequality in retirement. It is simply not good enough.”

Data released by Legal & General in 2022 highlights that the difference in pension pot sizes between men and women begins at the start of their careers as high as 16 per cent, and double by the time they are in their forties. 

This can rise to as high as 51 per cent in their fifties, and be up to 55 per cent smaller than men’s on average at the point of retirement.

Data from the Office for National Statistics among full-time employees shows the gender pay gap was 8.3 per cent in April 2022, up from 7.7 per cent 12 months before. It estimates that women save a third less than men across the UK, creating a disparity of 40 per cent between men and women at the age of retirement. 

Education, education, education 

Punter Southall Aspire director of marketing Sarah Tolson recommends that employers support female workers by offering financial education to help them understand how to address the gap.

“Women are hit financially from all sides, with the impact of earning less than men affecting both savings and pensions. Even the gain on the state pension sees women still getting less overall,” she said. 

“Add to the equation the fact that women are more likely to take a career break or work part-time when they have a family, and it’s little wonder many are at a big disadvantage financially by the time they retire.” 

Around four in 10 marriages end in divorce in the UK, but women often lose out here because they do not understand the value of a pension. A 2022 Which? survey shows that only 15 per cent of couples include the pension as a joint asset to be shared.

Tolson added: “Knowledge is power, but often women are unaware of the consequences that taking a career break can have on pension savings, or that in a divorce, taking account of pensions when splitting up joint assets can make a big difference to future finances.

“We urge employers to help women improve their financial health by raising awareness of some of the issues around pensions and savings to help them make better financial decisions.”

All equal, but with different needs

In offering support for female employees, employers should not focus on equality, but equity in their support for women’s health and wellbeing, according to digital health platform Peppy.

Equity acknowledges that women have different needs from men, so resources and support should be allocated on that basis. Instead of treating everyone the same, they should provide support that meets those specific needs.

Francesca Steyn, director of fertility and women’s health services at Peppy, said: “Women and men will experience very different journeys in their careers, and as such have different needs at work. Unsupported, these needs quickly turn into lost talent for an organisation, widening gender gaps and an inability to attract certain demographics.”

This will recognise the need for specific health and wellbeing support, particularly for moments of high physical and mental stress, such as pregnancy, miscarriage and menopause, and for other non-time-specific conditions such as painful periods and endometriosis. 

This is likely to be addressed as part of more holistic financial health and wealth approaches being adopted by many employers, and will significantly improves their chances of retaining and attracting this demographic.

“Employees want to know they work for a responsible employer, who looks out for them as people not just as staff, and who aligns with their own values, morals and stories,” said Steyn. 

“It’s time for employers to embrace equity, recognise the differences across their spectrum of employees, and respond with the support that delivers equal outcomes – that being the ability for all women to be able to thrive at work each and every day.”

Pádraig Floyd is interim editor of FTAdviser's sister publication Pensions Expert