The gender pension gap – the gulf in difference between how well-prepared men and women are for retirement – is a serious cause for concern.
The latest Women and Retirement Report found that the average UK male aged 65 to 74 holds over £250,000 in pension assets, compared to less than £150,000 for the average woman. Most obviously, this means women are less likely to be able to enjoy a long, comfortable retirement. They might have to work longer and still live off less – they are likely to experience a poorer quality of life post-work.
One of the devastating consequences of the smaller pension pots women typically have is they can be left feeling reliant on others, including a partner they might not otherwise want to be with, due to the much-needed financial support they can provide during their retirement.
Indeed, numerous studies have shown that a lack of financial independence leaves women more exposed to issues like domestic abuse. As Dana Harrington Conner states in her paper Financial Freedom: Women, Money, and Domestic Abuse: “Financial impediments, in particular, play a major role in restricting the freedoms enjoyed by women who are abused by their intimate partners.”
Sadly, the gender pension gap has been exacerbated by the cost-of-living crisis. As most of the population finds their finances under increased pressure, those with lower salaries, smaller savings and less advanced money management skills bear the brunt of skyrocketing inflation.
My Pension Expert’s recent research shone a light on this. In late January 2023, we commissioned an independent survey of 2,000 UK adults, finding that 47% of women in full- or part-time work feel the cost-of-living crisis has derailed their financial plans. Only 38% of men said the same thing.
Further, 61% of women believe the cost-of-living crisis has made retirement impossible, compared to 49% of men. While 40% of men are confident they will be able to retire at their desired age, this figure drops to just 29% among women. Similarly, although 42% of men say they have the savings and plans in place to sustain their current lifestyle into my retirement, only 26% of women say the same thing.
Access to financial support
The Department for Work and Pensions is considering regular reporting on the gender pension gap in order to bring more attention to the issue, the pensions minister Laura Trott said in February. This is to be welcomed.
However, we also have to be mindful that the gender pension gap is not over-simplified as an issue purely concerning the size of men and women’s retirement funds. As noted above, this undoubtedly sits at the heart of the matter, but there is more to it than that.
The gender pension gap extends to women feeling less in control of their finances, less able to create long-term financial plans, and sometimes alienated from crucial financial services, such as seeking independent advice.
My Pension Expert’s aforementioned research showed that, while there is an alarming lack of financial preparedness across both genders, women are far less likely than men to know how much is saved in their pension pots – less than a third (32%) of women know the value of their pension, compared to 44% of men.
Further, far fewer women (13%) have sought professional financial advice to help them manage their finances during the cost-of-living crisis than men (23%).
Tackling the issue
The key question, of course, is what can be done to bridge the gender pension gap. Clearly, there will be no quick, easy fix – it will take a concerted, long-term effort by government, employers and the pension sector to correct this deep-seated issue.
Addressing the gender pay gap is a crucial starting point. After all, smaller salaries will mean smaller pension contributions, resulting in the huge difference between men and women’s retirement funds by the time they reach their 60s.
As of April 2022, government data showed that among all full-time and part-time employees, men earn on average 14.9% more than women. Some progress has been made – the pay gap is down from 26.9% in 2002 – but encouraging more transparent reporting on gender pay breakdowns within organisations would be a positive step to bring the issue to employers’ attention.
Ensuring more women reach senior leadership positions will also help tackle the gender pay gap. For one, it ought to mean a greater proportion of women advance onto higher salaries. But the greater representation of women at the top echelon of management is also likely to result in a greater focus on issues like equal pay.
But we must also tackle the fact that so few women are calling upon the advice sector. As a priority, independent financial advice must be made more accessible so that women can better understand their financial situation and the options available that suit their specific needs. I urge the government to work closely with regulatory bodies and advisers to make this possible.
Further, the advisors themselves can undoubtedly do more. They can talk more about the gender pension gap; financial issues affecting women; and why financial advice need not be expensive or complicated, but rather that is available and valuable to all.
With greater attention paid to the gender pension gap, more done to bridge the pay gap, and a more accessible market for independent financial advice, I am confident that more and more women will gain greater control over their finances and, in turn, achieve the retirement they deserve. Clearly, as the cost-of-living crisis rages on, there is no time to waste in addressing these critical challenges.
Lily Megson is the Policy Director ofâ¯My Pension Expert.
