L&G is calling for urgent action following new data from over 4.5 million investors revealing that the UK gender pension gap has scarcely altered since 2020.
The study reveals that women are always at a financial disadvantage, even at the beginning of their careers. It analyses data from more than 4.5 million members across L&G’s defined contribution DC pension scheme clients.
The initial gap of 16 per cent grows as women enter their 40s, quickly increasing to 31 per cent. The disparity already exceeds 50 per cent by the time people withdraw their tax-free money at age 55, and it worsens to 55 per cent by the time they reach retirement.
The gender pensions gap has narrowed slightly across age groups, according to the most recent data for 2021, but only by 1 per cent at the beginning and the conclusion of women’s careers. Women will continue to retire with significantly smaller pension pots than men for many years to come if the current trend continues.
L&G also examined the size of the pension pots of over 50,000 Britons who retired in 2021. At the time of retirement, the average pension pool for males was £26,000, compared to just £12,000 for women. Even though retirees are likely to have many pension plans from various companies, the difference is anticipated to be fairly constant across all plans.
L&G acknowledges that immediate action is required and is urging all businesses and DC pension providers to openly report their own gender pension gaps so that all interested parties can become aware of the problem and cooperate to address it.
Legal & General commercial director of workplace savings Katharine Photiouat says: “There are many factors that have led us to this point but very few solutions offered. It’s time women stop being penalised for things outside of their control, like the high cost of childcare, or being paid less than their male counterparts.
“We know that women feel significantly less confident, and are more likely to struggle on knowing where to start, when it comes to making financial decisions. Industry and government must therefore work together to ensure education and engagement around savings and investments increase. For example, too few know about the flexibility that couples have in being able to contribute to their partners’ pension while they are on parental leave. This is something that can significantly reduce a women’s pension shortfall.”
Legal & General co-head of defined contribution Stuart Murphy says: “These figures demonstrate the glacial pace of change on the gender pension gap, as well as the need for greater cross-industry collaboration between government, employers, pension fund providers and members to address the scale of the challenge.
“In our view encouraging full disclosure to highlight the scale of the issue is an important starting point. We are calling for full disclosure from companies and DC pension providers to publicly share their gender pension gap so that we can better identify and fix this problem.
“We are also making a call for regulators and lawmakers to look at reform; including dropping the minimum age of auto-enrolment, abolishing the auto-enrolment minimum salary threshold and providing further support to help families with childcare costs.”
