Narrowing the gender pension gap A typical woman in her 60s has less than a third of what a male counterpart has saved in his pension pot, writes Ruth Jackson-Kirby
Multiple factors “The serious financial disadvantage women face in old age cannot be attributed to any one factor but is a combination of societal, health and financial factors stacked against them,” says Sian Fisher, Chief Executive of the Chartered Insurance Institute (CII). “Women are living longer; however, care costs them more at the end of their lives. Women are succeeding in the workplace and the gender pay gap is hopefully closing but caring for family, even for just a few short
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years, significantly impacts a woman at retirement. It is the culmination of all these factors that is potentially driving women towards poverty in old age.” The gender pension gap may be a real and depressing threat to a woman’s retirement income, but it can be overcome. There are a number of steps women, and their partners, can take to close the gap and put themselves on course for a comfortable retirement. “The earlier women start to plan their financial future and retirement the better,” says Natalie Jaques, a Wealth Planner at Sanlam. You might not know what your retirement income needs to be when you are in your early 20s but the longer you can contribute to your pension pot, the more funds you will have in retirement and you will also create more flexibility regarding the age you can stop working.” Start saving The key to any successful retirement planning is to start saving early. This is particularly important for women. Start saving in your 20s and you can build a pot that will have 40 years to grow. This is also the time when you have the fewest financial commitments so can afford to save a healthy amount into a pension. Saving just £100 a month into a private pension from the age of 22 to 30 could amount to a £184,000 pension pot when you hit 65, assuming annual growth of 7%. Figures show that the gender pension gap is at its narrowest when we are under 30. In our 30s the gap grows as women take time out of work to look after children. But this doesn’t have to be the case. “During paid maternity leave for the first 26 weeks,
Wealthsmiths Winter 2020
Photos: Alamy
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e all know about the gender pay gap. Fifty years may have passed since the Equal Pay Act became law, but women still earn 17.3% less than men, according to the Office for National Statistics. This has a huge impact on women’s financial lives but one area that is often overlooked is the gender pension gap. The gender pension gap refers to the significant difference between the value of the average man’s pension pot – and subsequent retirement income – and the average woman’s pension savings. Women in their 60s have an average £51,100 pension pot, according to the Pension Policy Institute (PPI). In contrast, the average man in their 60s has £156,600 ready to support them in retirement. There are numerous reasons for this. The PPI believes time away from work to raise a family or care for older relatives and working part-time account for half the gap, with the gender pay gap accounting for another 28%. It is a complex problem that won’t be solved overnight – it is expected to take at least another 20 years to close the pay gap alone.
