The gender pension gap has closed to just 1% – the narrowest on record – as more women are putting enough money aside for a comfortable retirement. Almost three in five (59%) women are now saving adequately, compared to 60% of men.
Kay Ingram, public policy director at national IFA firm LEBC says even though there has been some progress the overall gap at age 65 is still significant: “With women owning one third of the pension assets of a man on average. That gap is unlikely to close while women continue to shoulder the lion’s share of caring duties and take time off work, go part-time or choose less demanding roles to fit around their family responsibilities. Having significant time off work to care for others is the biggest single cause of the gender pension gap and women having less financial security over the long term.
“Whether someone chooses to be the main carer in a family or to pursue a career is largely a matter of personal choice but women who choose the former and give up the opportunity to build a bigger pension can take steps to fill the gap even if not in paid employment.”
Despite this progress, the persistent pay gap and part-time working ratio means women saving adequately on the median wage are still saving £1,300 a year less than men, according to Scottish Widows’ latest Women and Retirement Report.
This means for a woman to save the same amount into her pension as a man, she will need to work an extra 37 years – which would take her over the age of 100 if retiring at State Pension age – a number that is likely to grow as the full economic impact of the pandemic is realised.
Young women struggling to save
Young women are among those struggling most to save for later life. Just 46% of those in their 20s are saving the recommended minimum 12% of salary. This compares to 56% of men the same age, and to almost two-thirds (64%) of women in their 50s, showing that women do tend to save more as they get older.
However, not saving more while young means women miss out on the benefits of compound interest, which can help savings increase substantially over their working lives.
Jackie Leiper, managing director, workplace savings at Scottish Widows, said in a statement: “While we’re heartened at the record levels of saving, there’s still a mountain to climb before we reach true gender pension parity. Women face decades of extra working before they’ll have a pension to match that of a man’s, which is unfair and unacceptable. Until we can resolve structural inequalities, from the gender pay gap to the uneven division of labour at home, we will never have pension equality.”
Automatic Enrolment (AE) has been a huge driver in getting more women saving for the long-term, but there are still a number of structural challenges preventing a truly level playing field.
Women are still paid less than men, significantly impacting their ability to save. Of those in full-time jobs, men earn on average £6,100 more a year, a figure that increases to £10,800 for all employment types.
Extra commitments such as childcare also tend to fall on women, reducing the number of hours they are able to work and therefore limiting earnings. In 2020, three-quarters (75%) of all part-time workers in the UK are women and the majority of UK families with a child under four consist of a father working full-time and a mother working part-time.
These challenges are likely to have been amplified by the pandemic as women are more likely to be working in shutdown industries, such as the hospitality trade, where many have been furloughed, seen their hours reduced or been made redundant.
Ingram’s ‘top tip’ to avoid financial gender equality is the following: “Choose a partner who regards your work to be as important as theirs and who takes their responsibilities to the family as seriously as their career. Working to 100 is not desirable. Financial advisers have a role in helping their clients realise good retirement outcomes. Part of that is ensuring both partners have a realistic expectation of a financially secure retirement, whether they both, or only one of them, survives to old age.”