Updated for April 2018
The latest 2018 figures show that women have more than 50% less in their pension pots, on average, than their male colleagues and we can’t help but wonder why. The pension gap is a topic close to our hearts at PensionBee, and is one of the reasons why we’re determined to make pensions accessible to everyone.
Here are just a few of the issues that contribute to the gender pension gap and what we can do differently to ensure women aren’t heading for a retirement shortfall.
Women more likely to take time out
IFS data shows that around the age that many women take time out of work to care for children, the gender pay gap widens and the pension gap does too. It makes sense that the two things are connected, because if you have less take-home pay, then you have less to put into your pension pot. Women returning to work on flexible hours, going back part time or taking demotions and more junior jobs are likely to see their pension contributions take a hit.
Of course, this is linked to wider socio-economic trends: women are still much more likely to stay home with the children. The uptake of shared parental leave, which means women give some of their maternity leave allowance to their partner, has been poor, perhaps largely due to the way the legislation is being implemented. Many organisations offer higher maternity pay than shared parental pay, and a minority of men say that the concept is encouraged by their employer.
There are lots of employer and employee attitudes that need to shift before this is embraced fully, perhaps accompanied by further legislation that makes things more equal.
Returning full-time is tough
Once you’ve been out of the workforce, it’s an uphill struggle to get back in, for many reasons. Those who’ve had a career break are seen as less skilled and out-of-date. As a society we don’t see child-rearing as something that develops transferable skills, and many women (and men) who have taken time out to care for children find that they’ve slid right down to the bottom of the job market.
Plus, it’s often not practical for both parents to return to work full time. Figures show that UK childcare costs have been rising for years, while real term average wages have been falling. With 50 hours of childcare per week costing an average of £11,000 per year, for many families it just doesn’t add up for both parents to work full time.
Employers are afraid to embrace greater flexibility
Women returning to work therefore often seek something that’s more flexible or part time, but this limits job options, pushing many into low-paid work and hindering career progression. As women get older, the pay gap (and the pensions gap) grows. Perhaps one of the biggest changes that would begin to close the gap would be a move towards more flexible and progressive workplaces.
Imagine if more workplaces saw flexible hours, home-working and job-sharing as things that could benefit all employees, creating a happier and more productive workforce, rather than perceiving them simply as the awkward and career-limiting requirements of parents. If this attitudinal and cultural shift took place, it would mean that parents weren’t so restricted when it came to looking for a job that fitted around their childcare arrangements.
Women losing out in the long-term
In many ways, we’re still living in a world that’s set up for one parent working full time to bring home the bacon, while the other parent stays home to bring up the kids. And the parent staying at home is still more likely to be the mother. Childcare costs, inflexible workplaces, and unfavourable attitudes towards returners all implicitly enforce this, even while the explicit narrative tells us that both parents should be able to work and women aren’t at a disadvantage.
And pension saving is actually one of the many hidden ways that women suffer in the long-term. While the pay gap is frustrating but well-known, the knock-on effects are less immediately obvious. While your partner may be supporting you and the rest of your household while you’re at home with the children, they’re unlikely to be contributing to your pension pot. So right now your income is shared, but how about decades from now when the pension you’ve accumulated buys you a far smaller retirement income?
Products geared towards men
There are other issues at play here too. Historically, financial products have been designed by men, for men, and the industry is slow to change. When polled, women were more likely than men to say that they cared about security when choosing finance products, while men were more likely to say they cared about growth, returns and profit.
Financial advertising tends to emphasise these attributes that are apparently more appealing to men. Plus, women often appear in finance adverts as ‘visual props’ rather than active agents, reinforcing the sense that, as a woman, these products ‘aren’t for me’. Women’s lower engagement levels with products like pensions and ISAs compounds the economic disadvantage women face. Our CEO Romi has written an article addressing this, and giving some suggestions for how women can make the most of their money.
How PensionBee is doing things differently
At PensionBee we’re doing things differently. We’re part of a new generation of finance companies that are making it easier for everyone to take control of their finances. Our aim is to make pensions more customer-friendly, more transparent, and easier to understand. We’re led by a female CEO who’s committed to designing and marketing products in a way that’s inclusive, and that encourages everyone to save for a happy retirement.