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Let’s call time on the gender pension gap

 

 

You might have heard of the gender pay gap, but unfortunately financial inequality doesn’t stop at women’s salaries. It affects their pensions too.

In their 2020 annual Women and Retirement report, Scottish Widows said that women, on average, are saving much less than men into their pensions – on average, £1,300 a year less than men. 

This equates to a gap of £100,000 in savings between a man and a woman over an average 44-year career.

And yet women are saving harder than ever! The report shows that 59% of women aged over 30 are now saving adequately, the highest since their survey began.
 

So why the gender pension gap?

There are both professional and social reasons for this.

On the professional side, women still tend to be paid less than men, and work in less senior positions, or in part-time jobs, which means that over their lifetime their savings into their personal or workplace pensions are much less.

On the social side, women are much more likely than men to take a career break during their working life. In the vast majority of cases it’s mum, not dad, who take time out to raise the children. If they decide to raise them to school age, that can mean up to five years away from the workplace, which is of course five years less of valuable contributions going into their pension – contributions that are critical in those relatively early savings years of our late 20s and early 30s. 

Many mums choose not to return to work at all, or if they do, they return to part-time work only: in its 2019 Labour Force Survey, the Office for National Statistics revealed that three quarters of all part-time workers in the UK are female. Again, this impacts on their salary level, and pensions contributions, in comparison to men.

The hidden cost of having children is a trend so universal that it’s referred to in financial circles as ‘the motherhood penalty’, and it affects women long after they return to work. According to the Social Market Foundation, mothers are earning 20% less than their partners ten years after the birth of their last child. 


The impact of Covid-19

In the course of the past year, women have taken another blow to their pension saving aspirations. Some of the main types of business with a high percentage of female employees, including retail and hospitality, were those hardest hit by the extended periods of closure during lockdown, and the Institute for Fiscal Studies found that as a result, women were 47% more likely to have lost or given up their jobs than their male counterparts.

It is, therefore, no great surprise that the Office for National Statistics is telling us the percentage of people working past retirement age has doubled since 1998. Some want to, of course, but many have no choice, because women often simply cannot afford to retire as soon as they had hoped.
 

The state pension

Women are also disadvantaged due to changes in the rules governing their state pension. In the 1995 Pensions Act the Government announced that women’s state pension age would rise from 60 to 65 – bringing it into line with men – and this came into effect in 2010. It was a contentious and controversial move, which brought widespread protests from women across the nation who had hoped they would retire at 60.

Last October the state pension age rose further, to 66, it will be rising to 67 sometime between 2026 and 2028, and further increases will follow after that, making for an even longer wait.

Just this year, in the March budget, some important information came to light that showed another reason for the pension pay gap. It was revealed that over 200,000 women have been underpaid on their state pension for years. The former pensions minister Sir Steve Webb, normally not a man for strong words, described the news as ‘mind-numbing’.

For all of the above reasons, we help many female clients to calculate how much they have saved towards their retirement. We give them an informed prediction of how much they will have to live on when the time comes, and show them how that relates to their retirement goals.

We then advise them of any action they need to take to redress any imbalance before they reach retirement, helping them to put their minds at rest and feel confident about their financial futures.

If you’d like to get this peace of mind too, and make sure your pension hasn’t been affected by the gender pension gap, please get in touch.

You might have heard of the gender pay gap, but unfortunately financial inequality doesn’t stop at women’s salaries. It affects their pensions too.

Central Investment Services (Scotland) Ltd is Authorised and Regulated by the Financial Conduct Authority. Registered in Scotland No SCO54118. Registered Address: 33 Albyn Place, Aberdeen AB10 1YL

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