Women would need to work until 83 to close the gender pension gap

Women would need to work until age 83 in order to close the gender pension gap, according to a recent report*. 

With women living on average four years longer than men, they need to have saved more throughout their lifetime to accommodate a longer time in retirement and close the gender pension gap.  On average, women aged 65 will have accumulated just £69,000 in private pension wealth, compared to men’s pension savings of £205,800.  The research also revealed that one in six women are currently ineligible for automatic enrolment into a workplace pension despite women’s employment rate being at its highest since records began at 72.7%. Over 10 million new savers have auto-enrolled since its launch a decade ago, however, it is by no means a perfect picture as almost the same number of people (10.4 million) are currently ineligible.  Women make up the biggest proportion of part-time workers in the UK and with reduced hours comes reduced pay.  Millions of women have not been able to save via a workplace pension, nor take advantage of their employer contributions and the tax relief.

Furthermore, pension policies and regulations have not kept pace with how many individuals now live and work, especially since the Covid-19 pandemic.   While the average UK pension pot has almost doubled to £111,600, women’s savings have hardly increased at all, the report revealed.  It also found that if inflation and the cost of living are taken into account, women are arguably in a worse position than before. 

Working, Childcare and the Pandemic

The research found there was a stark difference in working patterns between men and women throughout their careers, with just 27% of women working mostly full-time throughout their careers, compared to 45% of men.  Women spend an average of 10 years away from the workforce to start families and care for children and relatives, contributing to both the gender pay and pensions gaps by presenting fewer opportunities for career progression and higher salaries.  Over the past two years, working mothers have had to juggle work and caring responsibilities meaning they are likely to have reduced their working hours or stopped working altogether.  Over 5.8mn women are working in part-time roles (38%) which means they might not meet the £10,000 eligibility criteria to be automatically enrolled into their workplace pension, especially since the average earnings for someone working part-time is £6,922.

Flexible working is the number one way that we will close the gender pay gap.  So, the idea that women are being penalised in later life by the gender pensions gap for working flexibly and therefore being able to work at all is exhausting.   If women did not work flexibly and take on caring responsibilities, the economy would crumble.  Furthermore, the cost of childcare is a hindrance to many working households as the cost of childcare now tops the average cost of a mortgage.  Policies aimed at alleviating childcare responsibilities, in terms of both time and stress, could help to improve the labour market inequalities experienced by working mothers.

The research highlighted the need for the government to invest in childcare and parental leave, which in turn would undoubtedly see the gender pay gap and the gender pensions gap reduce, resulting in fewer women living in poverty in later life.

*The report made use of data from two surveys that respectively questioned approximately 40,000 households and 10,000 households.   

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