It is a well-known fact that in the UK, women are at a financial disadvantage to men, which is evident from the documented 13.9% gender pay gap. If you investigate further into this, it becomes clear that this inequality is not just annual salary – women remain at a greater risk of poverty, financial insecurity and insufficient pension savings.According to Age UK, one in seven pensioners in the UK lives in poverty and women are more likely to be living in poverty than men. This fact alone illustrates the importance of a good pension. Following this, Aegon has released their findings from a study in which they used 2000 participants’ aged 18 to 65 to investigate pensions. Their main findings were:
- Women on average accumulate £56,000 in their pension funds by age 50 in comparison to the £112,000 saved by men.
- The gender gap rises with age as women aged 50 who want to match their male counterparts pension at retirement would need to pay an extra £360 into their pension pots each month.
- Several factors including the gender pay gap and time spent out of employment to raise children to mean that women are less able to build up pension pots.
Why do differences in pension exist?
The Motherhood Penalty
- Women are likely to receive pregnancy discrimination. 11% of women said that they have had to leave jobs through redundancy, mistreatment or dismissal following a pregnancy.
- A further 20% told the Quality and Human Rights Commission that they had been passed over for a promotion, for a pay rise or even had their salaries reduced due to their pregnancy.
- After becoming a mother, many women who want to return to work find themselves returning to lower-skilled roles. This is because many employers believe that a gap in the CV automatically means that an individual’s skills have deteriorated.
- A report by PwC found that women returning to work after a career break lose out on £4,000 (on average) each a year because of this.
The Childcare Penalty
- Women’s finances are likely to be affected by the cost of childcare, which often affects their earning potential.
- While it has become more common for a man to take on childcare, women still do most of it.
- The Young Women’s Trust found that almost 300,000 young women in the UK are ‘shut out’ of the job market, despite 86% wanting a job.
- The charity said that caring for family members is the main reason women give for being economically inactive and that mothers are affected by the unaffordable cost of childcare.
Kate Smith, Head of Pensions at Aegon had this to say:
‘Shockingly, 100 years after women secured the vote, we have a gender pay gap across every occupation: The fact that the pay gap filters down to mean women receive lower pension incomes is a double blow.
When you factor in that women’s ability to solve is further interrupted by breaks in their career to raise a family or care for elderly parents, the pension gap reached epic proportions, making it difficult to catch up.
Gaps in pension saving history leave you worse off in retirement but for women who take time out of their career this is unavoidable and could mean they have to work longer to make up the shortfall.’
However, Smith argued all hope is not lost and the earlier women can address the shortfall, the better. She said women in the early days of their career are within touching distance of men’s overall savings and there are many steps women can take to increase their chances of a secure retirement.