Experts reveal the key reasons behind increasing pensions gender gap
The projected financial gap between men’s and women’s pensions at retirement has widened since last year, a new report has found.
Scottish Widows estimates that women are ready to retire with an average private pension wealth of £173,000.
This figure is £113,000 lower than the predicted average of £286,000 for men.
This widening disparity marks an increase in the £100,000 gender gap in private pensions calculated just twelve months ago.
Scottish Widows estimates people’s retirement income based on their current wealth, their savings behavior and certain assumptions about factors such as how their income is expected to grow over their working lives and when they will retire.
The study, where women often undertake care responsibilities, stated that more than half (58 percent) of women at or near retirement took a career break, compared to 12 percent of men.
It also found that two fifths (40 per cent) of women had not planned financially for a career break and more than half (56 per cent) had never considered the impact it would have on their retirement.
Childcare was the “salient explanation” for career interruptions, but health and menopause also played a role, the report said.
The report found that women who took a career break were more likely than men to say it had reduced their ability to save.
Women were also found to be more likely to be unable to achieve even a minimum lifestyle in retirement; It is estimated that 36 percent of women are not on the right track, compared to 31 percent of men.
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The forecast is compared to a set of “retirement living standards” set by industry body Pensions UK.
Susan Hope, retirement expert at Scottish Widows, said: “To achieve true equality in retirement, we need to make sure career breaks do not undermine women’s future financial security.
“There are a few simple ways to help address these gender retirement concerns.
“We need to improve awareness and adoption of shared parental leave policies.”
She added: “In addition, partners need to actively save for a women’s pension when they take a career break, if possible.
“This is also known as third-party contributions and, although often overlooked, is a useful financial planning tool.
“Not only would this maximize tax relief for those who have exhausted their allowances, it could also help close gaps in pension contributions when earning power is limited.
“Employers also continue to play an important role in pension contributions during maternity leave.
“Fortunately for women, employer contributions in a workplace scheme are often calculated based on their pre-leave salary.”
YouGov surveyed more than 4,000 people across the UK for Scottish Widows in August and September, and more than 5,100 people in January and February.
Helen Morrissey, head of pensions analysis at Hargreaves Lansdown, said: “Women pay a big price for taking on the majority of caring responsibilities when it comes to pensions.
“A mix of low wages, part-time work and employment inequality is turning the gender pension gap into a yawning chasm, and there is little women can do about it without workplace reform to help them stay in the workforce.
“This may include the provision of quality, affordable childcare and more flexible working, which will enable them to more easily balance care and work responsibilities.
“This also shows the enormous impact menopause can have on women’s retirement prospects. At a time when women could be starting to rebuild their long-term resilience after being out of the workforce and reducing wages, menopause has the potential to cause further damage.”
“Once again, a more flexible approach to working arrangements could be a game-changer in helping women thrive and build their financial resilience during this challenging time.”
