The Gender Pension Gap
What is it & how can you reduce it
It is extremely likely that you will have heard of the gender pay gap, but have you heard of the gender pension gap?
What is it?
The Gender Pension Gap is the percentage difference in pension incomes between female and male pensioners- that being that males are on average likely to have a higher pension pot upon retirement than females.
As it stands, the current Gender Pension Gap is at 40.3%1, which is more than double the size of the pay gap. To translate that into monetary terms, Scottish Widows recently stated that women currently in their 20’s will retire with a pension worth, on average, £100,000 less than a man of the same age.2
An especially concerning figure as women live on average 3.7 more years than men.
But what causes it?
Unfortunately there are a few reasons as to why the pension gap exists. Two of the main contributors are:
- The Pay Gap: While the Gender Pay Gap has advanced tremendously over the years, the gap still lies at 15.5% as of 2020. Therefore, a difference in pay can lead to a disproportion in the amount of pension contributions made between males and females for their future.
- The Motherhood Penalty: This refers to the disparity faced by working mothers. On average, women take more time off work than males as a result of pregnancy and the childcare responsibilities that follow. For that same reason, women also make up 75% of the part-time workforce.3 Therefore, on average women encounter reduced working hours more than men, meaning a reduction in pay and so a mass of women- 1.2 million to be exact- miss the auto-enrolment pension threshold.
But what can be done to reduce the gap?
Leading financial industry experts state the biggest reduction to the gender pension gap can be made by changes to the auto-enrolment threshold. They state a removal of the £10,000 threshold and a lowering of the minimum age 22 to 18 will allow a significant number of women in part-time work to have access to a pension. However a change in law is required by the government for such or at the discrepancy of employers.
Nevertheless, there are a number of steps women can take individually to boost their pension worth:
- Kickstart your savings early: When your young is can be difficult to save for a future that seems so far away, however, by saving a small amount more in each in your twenties, you can significantly reduce the pension gap you may face in your future.
- Increase pension contributions: While this may not be possible for all- if you are able to increase your personal monthly pension contributions without affecting your lifestyle too significantly, this too can help to increase your pension pot upon retirement.
- Stay informed: By improving your financial wellbeing, you can gain a clearer understanding of your pension and the different investment options available, this can help to open up more opportunities to help maximise the value over the long term. 4
If you would like to ensure your pension is performing at its optimal level for you and your future, our team of qualified financial advisors at DAM are available to provide further guidance and advice. To arrange an initial cost free meeting, email us at firstname.lastname@example.org
* Please note, the information contained in this article is for informational purposes only and should not be construed as individual advice. If you would like further guidance on the above topic, or to speak to one of our qualified advisers, please visit our website at www.damgoodpensions.com or contact us on email@example.com
1. Now Pensions, 2020. Facing an unequal future: Closing the gender pensions gap. Now Pensions.