The gender pension gap at a time of crisis

How can we better tackle the gender pension gap which is widening in some cases? It starts with understanding its causes.

jar filled with coins titled 'retirement'


We know that the gender pension gap  – the gap between men and women’s pension income – is much larger than the gender pay gap [the most recent figure is 37.9%, but it varies with age], but that gap is widening for some, such a divorced women, according to a new report. And the cost of living crisis could make things worse.

A report from NOW: Pensions and the Pension Policy Institute found that the private pension incomes of underpensioned groups such as women, those who don’t own their own homes and those who work non-traditional patterns, remain below three-quarters of average population private pension incomes, with some groups experiencing significant declines since 2020.

It says women’s average annual incomes are 80% of the UK average and 67% of men’s average annual incomes, with the figure for single mothers being just 60% of the UK average. Moreover, it adds that, since 2018, the gap between women’s average incomes and the UK average has grown from 12% to 20%.

The report states that, of the 14.6 million employed women in the UK, around 2.5 million (17%) do not meet the qualifying criteria for automatic enrolment, compared to 8% of male employees. This is in large part because 1.9 million women earn below the earnings threshold of £10,000, making up 79% of the workers who do not meet this qualifying criterion.

NOW: Pensions wants to see the threshold for auto enrolment [which has done such a lot of improve the pensions plight of women] abolished and pension contributions starting from the first £1 earned.  The argument is that money contributed reaps rewards in older age, for instance, if you pay in 40 pounds, you get 10 pounds tax relief and your employer contributes 30 pounds, meaning the total sum you get is 80 pounds ie double the amount you invested.

Women often have a lower pension income due to a number of different factors, including career breaks for children or other caring responsibilities and their higher likelihood of working part time – which means they often earn below the auto enrolment threshold. They can, where possible, top their contributions up before they retire, for instance, after their children have grown up and they may be able to work longer hours.

The cost of living crisis is likely to make things worse, however, as people reduce their contributions in order to have more ready cash. recent report out from Aviva shows that one in four (23%) people who have a pension – the equivalent of almost five million people – are thinking about withdrawing money from their pension, opting out of automatic enrolment or planning to reduce, pause or stop their contributions in a bid to help ease the financial squeeze.

It’s very hard to argue for saving against the difficult decisions people are having to take at the moment, but experts say that it is vital that they are aware of the potential long-term implications. Some have called for employers to continue to pay their part of the contributions to make it easier for people to recover afterwards and to avert a much bigger pensioner poverty problem in the next decades.

The gender pension gap is a complex problem and requires an understanding of and commitment to addressing all the factors that contribute to both it and the gender pay gap. It’s a cumulative thing and no one policy can solve it. We have to do the work, join the dots and raise awareness. Our keynote speaker for the Top Employer Awards in February is Jane Portas OBE who has made it her mission to do just that. She says employers have a key role to play, stating: “Employers are a pivot point between how people engage with money and their pensions. We need to give everyone the confidence to be informed about their life decisions so they can empower themselves financially.”

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