The pensions gender income gap is more than double the gender pay gap at 41% compared to 17%.
The problem is a lot of women don’t know about this until it smacks them in retirement. This is because no-one tells them.
Women Seem To Get A Raw Deal
We know through the work that we did in our previous report that there are 4 areas of real concern.
Firstly, lots of women take career breaks to have children. My colleague Jenny Griers wrote recently about her own personal experiences of working part time, and the impact this has had on her ability to save money. Childcare is expensive, and many mums simply can’t afford to go back to work.
Secondly, it is also well known that women get paid less than men in terms of salaries. That gender pay gap in turn means lower pension contributions – therefore less income in retirement.
Third, too fewer women qualify to be auto-enrolled into company pensions, thanks to inflexible rules. They may have several jobs that flexibly fit around their caring duties, however, if each pays less than £10,000, they miss out on being automatically placed into their employers’ qualified pension schemes.
Lastly, one of the perks of a workplace pension pot is tax relief. But around 1.75m people, most of them being women, will not get this because of the way their employer claims tax on their net pay. This is a clear glitch in the pension rules and as such we have been calling on the government to fix this anomaly for a number of years.
All of this is made even worse for women because savers in general tend to be unaware of how much they will need to last throughout retirement.
The Problems Need Fixing
We have recommended that the pension industry (and that includes us too) do more to liaise with women in their 45+ who work part time. If we can all aid women to better understand the long-term effects their reduced pension contributions have on available income in retirement, they will then have a far better understanding to make their own informed decisions.
Better engagement is only a part of it though. The government need to step up by supporting women who may want to return to their career or work more hours once they have children. They can do this via bigger grants for local authorities to provide greater funding for better quality pre-school childcare. They can also scrap the net pay anomaly, to help those nearly 2m low earners to receive a much-needed tax relief to bolster their pension advice near me savings.
And then there are several other technical things to fix, like bringing more lower paid workers into workplace pensions – 1/3 of them being women – by cutting the yearly auto-enrolment earnings trigger down to £6,240. Our report in 2019 into this issue also recommends that more thought should be given to extending state pension carer credits to auto-enrolment. There is much to do.
The gender pensions income gap may only be bridged if both the industry and policy makers take decisive action and with speed.
