July 23rd, 2019
Gender pay gap strikes again, this time for Women’s pension pots
A report released earlier this month “Facing an unequal future – closing the gender pensions gap” was compiled by workplace pensions provider Now Pensions based on research conducted by the Pensions Policy Institute and data from the Office for National Statistics.
Alarmingly, it noted that at retirement women on average can expect to receive a pension pot of £51,100 compared to men’s £156,500, meaning that men receive two thirds more than women.
It found that working part-time or taking time off work to care for family contributes to 47 per cent of the difference with the gender pay gap accounting for a further 28 per cent. Women earn around 18 per cent less than men, on average, according to researchers.
The fact that women also tend to live longer than men and pay a disproportionate amount of childcare costs may also make it harder for them to build up a comfortable amount of retirement savings. The report found that to be able to receive the same pension income as men, women would need to have saved up to 7 per cent more by retirement age.
Additionally, divorced women end up particularly worse off averaging just £26,100 compared with £103,500 for divorced men. The figures indicate that divorce affects women’s savings more than men’s, with the variance the result of individual divorce settlement terms. The research found that pension savings can often be the second most valuable asset when couples divorce, however they are often overlooked, with people paying more attention to property – in 2018, there were 118,142 divorces but only 4,632 pension sharing orders were made by courts.
Laura Suter, personal finance analyst at investment platform AJ Bell, stated: “We’ve long known that women’s pension savings are hit by a combination of the gender pay gap, part-time working and the increased burden of childcare costs, but these new figures lay bare the scale of the problem.”
“Women face a triple whammy when it comes to their pensions: first, they are not saving enough, second, they are not investing that money and so are missing out on higher returns over the long term, and third, they live longer and so on average need bigger pots than men at retirement.”
“Raising awareness of the pension gap is the first step. Employers also have a role to play in highlighting the benefits of maintaining pension payments throughout maternity leave, and offering enhanced pension packages for these women.”
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Written by Kay Crooke – Associate Practice Director at Prosser Knowles Associates Limited.