The gender pension gap will take 20 more years to close unless actions like lowering the auto-enrolment age, extending AE to part-timers, and increasing contributions to 12 per cent are implemented, all of which could significantly boost women’s retirement savings, according to the latest Women and Retirement Report from Scottish Widows.
The 20th annual Women and Retirement Report reveals that while progress has been made with a decreasing gender pay gap, more women working and saving into pensions, and shifting attitudes about women’s roles, the gender pension gap remains at 30 per cent.
On average, men will have £17,000 in retirement income, while women will have only £12,000, with 42 per cent of women on track for less than a minimum standard of living. Meanwhile, 2 million women feel they may never be able to retire, highlighting the ongoing challenges despite some improvements.
The report also shows significant differences in retirement savings across ethnicities, with Pakistani communities facing a 39 per cent gap, while Indian women track 10 per cent higher than the British average.
Scottish Widows workplace savings specialist Susan Hope emphasises the need for action across three areas: industry and legislation, employers and trustees, and personal responsibility. Despite some progress, she finds the pace too slow, noting that even after decades of equal pay laws, pay parity has not been achieved, and she is determined to accelerate change for the gender pension gap.
Hope outlines three key actions to close the gender pension gap: first, implementing auto-enrolment (AE) changes, such as removing the lower earnings limit and reducing the enrolment age from 22 to 18, which could add £47,000 to an 18-year-old’s pension pot.
Second, extending AE to part-time workers earning under £10,000, ensuring they still receive employer contributions, which could result in an additional £63,000 in their pension savings.
Finally, increasing AE contribution rates from 8 per cent to 12 per cent, potentially adding £82,000 to young women’s pension pots. Hope argues that these changes would have a transformative impact, especially for future generations of women.
Hope also highlights the need for stronger policies like shared parental leave and role modelling by senior men to drive change. She advocates for employers to maintain pension contributions for women returning from maternity leave and initiate conversations about the impact on pensions.
Furthermore, she believes employers should encourage personal responsibility by fostering discussions around investing, especially for younger women, and providing tools to help them get started.
Scottish Widows managing director Jackie Leiper says: “Progress has been made on the gender pension gap over the last two decades thanks to game-changing interventions like auto-enrolment and improving equality on women’s pay and role in society. But we are still a long way from where we need to be. Without drastic action, the gender gap will take another 20 years to close, and there is a very real risk that we won’t see pension parity for many generations to come.
“Extending auto-enrolment to support the higher proportion of women who are self-employed, or in part-time work is vital, as is the establishment of a Lifetime Savings Commission. Urgent action must be taken and we must empower more women to take control of their money through life and into retirement, with education, support, and innovative ways to engage with their money.
“The last 20 years has seen a move towards gender parity on pensions – but there is still more work to do to ensure more women can live and enjoy the lives they want in retirement.”