Gender Pension Gap
The issue of gender equality has long been the focus of passionate debate and diligent advocacy. Yet, there remains an often overlooked factor that significantly impacts women’s economic security: the pension gender gap. This refers to the disparity in pension savings and retirement income between men and women, a gap that persists in today’s society.
Understanding the pension gender gap is not just crucial for women approaching retirement age. It is a topic that should matter to everyone, regardless of gender or age. This gap is a powerful reflection of the broader inequalities that pervade our society, from the gender pay gap to unequal sharing of caregiving responsibilities.
The pension gender gap is not only an economic issue but also a matter of human rights and social justice. It fundamentally questions the value we place on women’s contribution to the labour market and society at large. Its impacts are felt on a daily basis by millions of women, reverberating across generations and forming a cycle that can be challenging to break.
In this blog post, we will delve into the complex issue of the pension gender gap in the UK. We will explore its causes and impacts, share real-life stories of women affected by it, and discuss strategies to address and bridge this gap. Whether you’re a young professional just starting your career, an employer, a policy maker, or someone approaching retirement, understanding the pension gender gap is the first step towards contributing to its resolution.
Overview of the Current Pension Gender Gap in the UK
Currently, the pension gender gap is a pressing issue in the UK. According to recent statistics, women in the UK retire with pension savings significantly lower than their male counterparts. This disparity is not just a few percentage points but can be as high as 40%, translating into thousands of pounds many women miss out on during their retirement years. This substantial gap is a stark indication that the gender inequality women face in their working years extends into and exacerbates their financial insecurity in retirement.
A new report by the Trade Union Congress has highlighted a gender pension gap between what men and women live on in retirement. The estimate is currently running at 40.5%, more than double the gender pay gap. BBC 4’s Women’s Hour reported this in June 2023 – listen to the broadcast here.
Causes of the Pension Gender Gap
The reasons behind the pension gender gap are multifaceted and complex, reflecting broader societal inequalities. One key factor is the ongoing gender pay gap. With women earning less on average than men, their pension contributions are also correspondingly lower.
Secondly, women are more likely to have career breaks, often due to childcare or other caregiving responsibilities. These interruptions have a cumulative effect on women’s ability to contribute to pensions over time.
Another contributing factor is the higher incidence of part-time work among women, which can result in lower contributions to pension schemes.
Finally, it’s worth noting that women tend to live longer than men, meaning their retirement savings must last longer, increasing the ‘longevity risk’.
Impacts of the Pension Gender Gap
The pension gender gap has profound consequences for women’s financial stability in retirement, increasing their risk of poverty and financial insecurity. This financial pressure can have psychological implications, leading to stress and anxiety. Moreover, the pension gender gap contributes to broader societal issues, reinforcing gender inequality and perpetuating the cycle of financial disadvantage for women.
Policy Measures and What’s Being Done to Address the Gap
Overview of government policies aimed at reducing the pension gender gap
The UK government has recognised the pension gender gap and has initiated various policies to address this inequality. For instance, one significant initiative is the state pension’s “new system” which has been operational since 2016. Under this system, the number of qualifying years for a full pension has been reduced, particularly benefiting women who have had to take career breaks for caregiving responsibilities.
Another policy under consideration is revising the £10,000 auto-enrollment threshold in workplace pension schemes. Lowering this threshold or abolishing it could enable more part-time workers and those with multiple employers to be automatically enrolled in pension schemes, leading to a more equitable distribution of retirement savings.
Additionally, the government has started implementing policies to facilitate shared parental leave and promote affordable childcare options. These measures could potentially alleviate the impact of career breaks on women’s pension contributions.
Corporate initiatives to encourage equal pension contributions
Several corporations have also taken the lead in addressing the pension gender gap. Many organisations have started to offer ‘family-friendly’ working arrangements, such as flexible working hours and remote working options, to help employees balance their work and family commitments. This can be especially beneficial for women, enabling them to maintain continuous employment and contribute consistently to their pension savings.
Moreover, some companies are making strides by topping up pension contributions during maternity leave and offering financial education specifically aimed at women, helping them understand their pension options and the necessity of retirement savings. It is also important that organisations are clear and transparent with women going on maternity leave and the effects that will have on their pension contributions.
Legal measures for ensuring equal pension rights
From a legal standpoint, the Equality Act 2010 has been instrumental in ensuring equal pension rights. It prohibits discrimination in the workplace, including pension schemes, based on several factors, including gender. The Act stipulates that employers must treat men and women equally in the terms and conditions of their employment, which extends to pension schemes.
Moreover, a series of rulings at the European Court of Justice, such as the Barber judgment, have reinforced the principle of equal pension rights, ruling that occupational pension benefits are a form of deferred pay and thus must be equal for men and women.
These policy measures, corporate initiatives, and legal protections are critical steps towards closing the pension gender gap. However, there remains much work to do, and it’s crucial to continue pushing for changes that promote equal pension savings and secure financial futures for all.
£10,000 a year threshold
As stated a major significant contributor to the pension gender gap in the UK is the current pension scheme legislation, particularly the auto-enrollment threshold. Under the current rules, only those earning over £10,000 a year from a single job are automatically enrolled into a workplace pension scheme.
This disproportionately impacts women, as they are more likely to be in low-paid or part-time jobs, often juggling multiple roles that may not meet this threshold. Therefore, even though their total income may exceed £10,000, they miss out on the employer contributions and the tax relief benefits offered by pension schemes, as they are not automatically enrolled.
This £10,000 threshold may seem arbitrary, but its implications are far-reaching. Many women, particularly those working in sectors with a high proportion of part-time workers, like retail or care, are falling through the pension saving net. This, in turn, widens the pension gender gap, as women cannot accumulate pension wealth at the same rate as men.
Practical Steps Women Can Take to Bridge the Gap
While the structural hurdles such as the £10,000 auto-enrollment threshold are substantial, they are not insurmountable. There are proactive steps that women can take to secure their pension savings and reduce the impacts of this threshold.
Opting In: Even if you are not automatically enrolled in a pension scheme due to not meeting the £10,000 threshold in a single job, it is important to remember that you can still opt-in manually. By choosing to participate, you will be able to receive employer contributions, NI and take advantage of tax benefits, thereby boosting your pension savings.
Financial Planning and Literacy: Understanding your financial situation and future requirements can be a game-changer. Equip yourself with knowledge about different pension schemes, savings options, and consider seeking advice from financial advisors.
Making Voluntary National Insurance Contributions: If your career break leads to gaps in your national insurance record, you can make voluntary contributions to ensure you qualify for the full State Pension.
How Employers and Society Can Help Bridge the Gap
Both employers and society at large play crucial roles in addressing the pension gender gap, specifically the issue of the £10,000 threshold.
Employers’ Role: Employers can proactively offer all employees, regardless of their income, the option to participate in pension schemes. This way, even those earning less than the threshold can benefit from pension contributions. Employers can also work towards raising awareness about the benefits of pension savings among their lower-income and part-time employees. Lastly, promoting equal pay, flexible working conditions, and financial literacy within the workplace can reduce the pension gender gap.
Society’s Role: As a society, it is important to push for policy changes to ensure that more women can benefit from automatic pension scheme enrollment. This could involve advocating for a lower auto-enrollment threshold or even its removal. Raising awareness about these systemic issues through forums, social media, or community initiatives is a crucial first step toward creating a societal push for reform. Ultimately, achieving gender equality in pensions requires a collective societal effort. We must foster an environment that encourages open conversations about the pension gender gap and advocates for policy changes.
