By the time they reach their 60s women’s pension wealth is less than a third of men’s – making them more than £100,000 worse off in retirement, according to new figures.
The new report from Now Pensions, based on research by the Pensions Policy Institute, says this discrepancy is a “part-time pension penalty” that is caused by s largely due to women juggling caring responsibilities with paid work.
Figures in this report — Facing an unequal future – closing the gender pensions gap — show that by the time the reach their 60s women typically have a pension pot worth £51,000, compared to men’s average pension pot of £156,000.
Working part-time has the biggest impact on pension savings. The report estimates that by the time women are in the late 50s, this alone results in a 47 per cent reduction in women’s pension wealth, compared to men.
In contrast the gender pay gap reduces women’s savings by 28 per cent. According to the latest government figures women earnings are typically 18 per cent less than men.
This pension gap is then further compounded by the fact that women live on average 3.7 more years than men meaning their pension needs to last longer.
An analysis of employment figures show that the proportion of women working is now 71.4 per cent, which is the highest female employment rate since records began in 1971.
But while this figure has risen in recent years, 41 per cent of those were working part-time in the last quarter of 2018 were women, compared to just 13 per cent of men.
A part-time salary means many women don’t meet the £10,000 a year threshold in a single job for to be auto enrolled into a pension scheme – causing them to miss out on saving for their retirement and receiving employer contributions.
Research conducted with part-time working women by Now Pensions revealed that three in 10 part-time workers don’t believe that their part-time hours will affect their pensions pots.
Two in five (41 per cent) part-time workers accept that they’ll have less saved, while others are combatting the shortfall by working longer (18 per cent) or planning to save more in the future (11 per cent).
The most common reason (34 per cent) for women working part-time is to allow them to balance work with looking after their children. As a result it is not surprising that Now Pensions found that the biggest harm to women’s pension wealth frequently occurs in their 30s. This is the typical age where women are likely to take time off caring for children.
However, many women in their 50s are moving to part-time work to look after their own parents or grandchildren, thereby falling even further behind their male counterparts in retirement savings.
Joanne Segars, interim chair of trustees at Now Pensions says: “Pension saving can be difficult, especially for women. Not only are women typically paid less, but they are much more likely to work part-time or take time out of the workforce to care for children or elderly relatives. This time out of the workforce has a huge impact and the part-time pensions penalty can’t afford to be ignored.
“Policy and regulation around saving for retirement need to change to better reflect the changes in the workplace and society. Small changes to auto enrolment could make a big difference for women but to really to bridge the gap more needs to be done to help mums remain in the workforce.”
Now Pension has put together a five-point plan for fairer pensions. This includes:
- Removal of the £10,000 auto-enrolment trigger to get more women into auto-enrolment – this would bring an additional 1.4m women into workplace pensions.
- Ensure auto enrolment contributions on every pound of earnings – this would improve pension part-time workers who are more likely to be women. This would increase pension wealth by 140 per cent at retirement.
- Introduce a family carer’s top up – women taking time out to care are compensated in the State Pension by State Pension credits, however, they miss out on auto enrolment. The family carer’s top up would see the government pay the equivalent of the employers’ contribution at National Living Wage level into women’s pensions who are taking time out to care. Now Pensions estimates this would equate to approximately £820 per year, and would boost women’s pension outcomes by 20 per cent. The report says this could close around half of the pension wealth gap created by taking time out of work to care for family.
- Ensure pension funds are always considered in divorce settlements Although pension pots can often be the second most valuable asset when people are going through a divorce, they are often overlooked, with people paying more attention to property assets.
- Greater action on the availability and cost of childcare to enable those that want to return to work