The gender pension gap

We take a look at the gender pensions gap. What is it? What causes it, how does it differ from the gender pay gap and how do we address it?

age bias, ageism

 

The gender pension gap has been highlighted in several reports over the last few years. Different figures are used to define it, depending on whether it refers to the percentage difference in average gross pension income for men and women receiving the state pension or a private pension.

Private pensions

One of the most recent reports from the Pensions Policy Institute, for instance, found that women’s private pension pots in the UK are around a third the size of men’s by the time they approach retirement.

The report says that, by retirement, women will have accrued £51,000, whilst men will have about £157,000 of pension wealth. It calculates that the gender pension pay gap stands at 28%, significantly more than the 18% gender pay gap.

The report adds that there are 50% more women than men heading towards retirement without any private pension savings, meaning they will be totally reliant on the state pension and their partner. It says 1.2 million women [5%] in their 50s are in this position.

This is despite the fact that, as women live longer on average 3.7 years more than men, the report calculates that women would need to have saved around 5% – 7% more than men by retirement age in order to draw the same pension income throughout their retirement.

Reasons for the gap

The reason for the pension gap is linked in part to women’s role as carers, career breaks and more part-time working.

The report says 1.2 million women in relationships with dependent children are currently looking after their family and are missing out on automatic enrolment pension contributions. An additional 1.4 million mothers with dependent children who are employed do not earn above the £10,000 threshold to qualify for automatic enrolment contributions.

The report says a family carer top-up could make up half the pension saving missed by taking time away from paid work to care for children, elderly parents and others. While it would not be enough to match those who do not take time out, the report says it would reduce the gender pensions gap by as much as 28% since it calculates that more women qualify to receive this benefit compared to men (1.5 million women compared to 150,000 men). Younger people who have not yet started families or are in the early stages would benefit more.

Tackling the state pension gap

A report on the state pension gap by the union Prospect last year put the gap at 40% – even bigger than the gender pay gap. It called on the Government to produce an annual report on the size of the gender pension gap to focus attention on the problem and help build a consensus for action to tackle it.

In addition, it said the Government should abolish the automatic enrolment earnings trigger which “disproportionately excludes women from occupational pension scheme membership” and it also recommended that the Government look at ways to positively recognise caring responsibilities in the state pension system and consider creating a new pension commission and giving credits to people who opt out of receiving child benefit as well as tax relief for low earners in net pay pension schemes.



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