According to a MoneyAge report from June 2022, women need to work for an additional 18 years in full-time employment to retire with the same pension as a male colleague in an equivalent role.
While a woman at retirement age will, on average, have amassed a pension fund of £69,000, an equivalent male will have saved £205,800, a difference of £136,800.
There are many reasons for this gap, including continued wage inequality, the greater number of women in part-time employment, and time spent out of work to start a family and care for children, and as a result of the menopause.
Keep reading for your look at the biggest challenges facing women in the build-up to, and during retirement, and how professional advice can help to bridge this pension gap.
Working patterns and wage inequality have historically led to a gap in adequate savings but that gap has closed
In its 2021 Women and Retirement Report, Scottish Widows found that the adequate savings gender pension gap had closed. The index looked at the percentage of savers putting aside 12% or more of their monthly income and found that 61% of women were saving adequately, the same figure as for men.
The adequate savings gap between men and women:
Source: Scottish Widows
While this represents a massive improvement from 2013, when only 40% of women were saving adequately, the results do not mean that men and women are saving the same.
The Guardian reported earlier this year that women are paid, on average, 90p for every £1 earned by men. This figure is worse in some sectors, such as construction, where it falls to just 76p for every £1 earned.
In its retirement report, Scottish Widows found that the average median salary for a man is £31,400 compared to just £20,500 for women.
Even with adequate savings of 12%, it is clear that a gap will still exist once retirement age is reached.
The greater number of women in part-time work means more fall below the minimum auto-enrolment threshold
Figures published in FTAdviser show that auto-enrolment numbers are positive across the genders, but especially among females.
The report confirms that in 2021:
- 91% of eligible females paid into their workplace pension
- 89% of eligible male employees did the same.
For part-time workers, the gap is even more pronounced:
- 86% of eligible females employed part-time paid into their workplace pension
- 74% of male part-time employees who were eligible paid into their workplace pension.
While this might sound like good news for women, the discrepancy in the number of part-time female workers compared to men has a huge impact on pension savings.
Of all UK employees in part-time work, 75% are female. Meanwhile, of all employed women in the UK, 38% work part-time.
The issue here is that the UK average annual earnings for part-time workers is just £7,000 while the minimum threshold to become eligible for auto-enrolment is just £10,000.
Time spent away from work to start a family and care for children often coincides with the optimum time for pension saving
In March 2022, Aviva reported that the gender pension gap begins to open up between the ages of 25 to 35. This is typically the age at which women start a family and have time away from work to care for their children.
While having a child affects the pension contributions a new mother makes, this is not true (to the same extent) for new fathers. Time off at this stage in a woman’s career can also affect the rest of their working life, with the opportunities missed difficult to claw back.
Even when women return to work and continue successful careers, later-life challenges including the menopause, can also have a retirement impact. Typically, our 50s are when the optimum pension saving occurs, but women are more likely to take time off at this stage in their careers than men.
Royal London recently reported that around 1 million women stop work altogether as a result of menopausal symptoms, leaving them, on average, £126,000 worse off.
Professional financial advice from early in your career could make all the difference in later life
While the gender pension gap is closing, structural inequalities in pay and the prevalence of societal gender roles that disproportionately affect women mean that challenges still exist.
Professional advice is key to meeting these challenges head one. At HDA, we can use our decades of experience to help you:
- Plan for the long term and put yourself in control
- Manage your workplace pension contributions
- Invest for the long term to inflation-proof your cash wealth
- Manage a divorce, which can disproportionately disadvantage woman
- Factor in the cost of potential later-life care.
Get in touch
If you’re worried about the financial challenges you face as a woman and would like help to bridge the gender retirement gap, we can help. Please get in touch via email at enquiries@hda-ifa.co.uk or call 01242 514563.
Please note
This blog is for general information only and does not constitute advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor. Workplace pensions are regulated by The Pension Regulator.
