While the gender pay gap remains a key issue in the ongoing pursuit of gender equality, concerns are also rising over women’s ability to save enough for retirement. This is known as the gender pension gap; the percentage difference in pension income for female pensioners compared to their male counterparts.

Recent research (opens a new window) shows that this gap is on the rise, increasing to 37.9% in 2019-20. This is more than twice the level of the gender pay gap in that same year which stood at 15.5%. While the exact causes of this disparity are unclear, complex factors such as a rising cost of living, challenges saving while on maternity leave, longer career breaks due to childcare, and a longer average life expectancy, are likely to contribute.

Given that women in the UK earn about 16% less than men (opens a new window), it’s perhaps unsurprising that women have consistently lower pension pot sizes, with the situation deteriorating as they approach retirement. A recent L&G study (opens a new window) found that the typical gender pension gap increases from 17% at the start of women’s careers to 56% at retirement age. This stark gap exists even in female-dominated industries.

While there is no one clear-cut way to address the growing inequality of pensions between men and women, employers do have some tools at their disposal to help women be better placed for retirement.

Drivers of the pension gap

Organisations including the OECD, Scottish Widow, and Unbiased, have all noted a rising concern that women are struggling to save for their pension.

Factors vary, though a major one is that women have a longer average life expectancy (opens a new window) compared to men. According to the Office for National Statistics, men are expected to live to 79 years of age, compared to women, who are expected to live to almost 83. While men will on average save around £350,000 by the time they retire, women have average savings of £250,000 by retirement.

Working mothers may be subject to reduced working hours due to childcare commitments, limiting the amount they can contribute to their pension during this period. The problem is often then compounded by typically longer life expectancy among women, meaning their pensions need to stretch further during retirement.

Potential solutions

There are steps companies can take to help female employees be better placed for retirement.

Financial education: Properly educating employees through seminars, brochures, and workshops will help them to understand:

- The impact of national insurance contributions on the basic state pension

- How pensions can be affected through maternity and extended leave

Saving initiatives: Employers can also provide information on alternative savings methods outside of pension contributions to help their female employees . Studies have shown that women take a more cautious approach when it comes to financial investments, meaning they potentially miss out on making their savings go further.

Educating employees on the best way to approach these schemes, the risks attached, and the benefits of them, will help to alleviate fears and encourage women to invest their money wisely.

Other steps to help female employees improve saving practices

• Make manual payments into the National Insurance payments to qualify for state pension, if female employees have taken breaks for personal reasons

• Ensure employee benefits provide schemes for short, medium, and long-term lifetime plans for women

• Take into consideration the longer average life expectancy of women when creating employee benefits

While educational initiatives can prove useful, they only go so far to address the issue of the gender pension gap. To better support women for their retirement, companies should continue striving to reduce the gender wage gap, and better support women as they return to work following a career break. By building a strong family leave policy, employees can share the burden of childcare more easily, which could also help to reduce this pension disparity in the long term.

If you would like to discuss the challenges women face in saving for pensions, the gender pay gap, and how your company can better help female employees, please contact:

Saba Haran, VP, Employee Benefits

E: saba.haran@lockton.com (opens a new window)

T: +447425616647