Gender pay gaps persist in lots of British companies, despite greater diversity in the workplace having a proven correlation with business performance. Countless companies are still behind the times in growing their female workforce, especially across senior levels. While the tide is slowly shifting towards equality, all those years without equal pay and pension contributions have created a divide: the gender pension gap.
The gender pension gap is simply the difference between the value of men’s and women’s pension pots. It can be measured at any point in time but it’s particularly large when women approach retirement as it takes many years to accumulate and build up a pension. PensionBee’s annual study of the UK Pension Landscape found that, on average, there’s a 38% gap between men and women’s pension pots.
The gender pay gap is almost exclusively framed as an issue women should be solving themselves. The message I consistently hear from the financial services industry is that women need to do more, however that’s neither effective nor fair. Placing the burden on the recipient of the system is simply not going to get us out of the gender pension gap mess.
Often unequal childcare responsibilities can be an explanation for the gap. Our research suggests that women typically reduce their working hours to care for children or elderly relatives, while men typically continue with their career progression and pension contributions during this time.
Last summer we modelled various interventions, and found that if men and women were to work the same hours at equal pay, with both working fewer hours to share childcare responsibilities during a child’s early years, before returning to full-time work, the gender pension gap could be eliminated.
One potential solution is couples taking Shared Parental Leave to close the gender pension gap within their relationships. However only 2% of new parents have used Shared Parental Leave since its introduction in 2015.
Gender pay gap
Another aspect of this issue is the gender pay gap reducing the wealth of women, as less pay over a lifetime of work leads to a smaller retirement income. Although the government has introduced mandatory gender pay gap reporting for companies of certain sizes, we’re still seeing a 16% pay gap. While these barriers are being acutely felt by women, a recent survey conducted by PensionBee revealed that men tend to underestimate the impact of these challenges on women’s retirement pots.
Gaps in pension wealth only grow as men and women get older: increasing from an 18% gap when women are under 30, typically before they begin having children, to a 46% gap once they reach their 50s. Our analysis suggests that in real terms women over fifty are set to retire on the smallest personal pensions (£87,500) whereas those under thirty are predicted to amass pots worth a third more (£140,700). One possible explanation is the arrival of Auto-Enrolment, which has helped increase saving rates among the younger generations.
Now you may think that young women are better prepared for retirement, but the pension landscape is constantly changing. Between the State Pension age and life expectancy of women both rising in the UK, there’s also an increasing pressure as women are living longer with less to live on. So the issue is unfortunately compounding faster than many women’s pensions.
Leading the change at PensionBee
At PensionBee, we see our role as critical in building the future we want to see, for both the customers we serve and ourselves. That’s why promoting diversity and inclusion within our team culture and hiring processes is a key focus of PensionBee, and echoes our commitment to achieving wider representation and equality in the pensions industry.
We’re keen advocates of Shared Parental Leave. As part of its commitment to promoting gender equality, PensionBee prioritises helping employees share caring responsibilities from the very beginning of their roles as parents, providing gender-neutral parental leave, which includes 110 days of full pay to all new parents. We’ve also had many instances of promoting women while they’re taking maternity leave.
As a member of the HM Treasury’s Women in Finance Charter, which seeks to see gender balance at all levels across financial services firms, we regularly report publicly on female representation. We’re proud to have achieved gender parity in all levels of the business including our board and are committed to actively recruiting females into traditionally male-dominated positions, such as roles in our technology team. We’re also focused on promoting women who have the potential to reach the management team, as we firmly believe gender balanced teams drive better products and services for consumers
As passionate campaigners for wage equality, we know that where a pay gap exists for women, a pension gap will follow. We decided to start reporting our pay gap voluntarily back in 2020 because we believe it’s important for companies to start tracking these metrics as early as possible and, if necessary, while changes are easier to make. We were proud to reveal a median hourly pay gap of just 4%, and a median bonus pay gap of 0% among staff, as at December 2020. The gap is in line with our target of 0%, with a variance of +/- 5% owing to the overall size of the employee base.
Recently, I was joined by Sam Brodbeck, Personal Finance Editor at The Telegraph and Emilie Bellet, founder of the financial education company Vestpod, to discuss this issue on the Pension Confident Podcast. Together we agreed that pensions are long-term investments and solutions also need to be long-term to give us time to close the gender pension gap together as a society.
At PensionBee, we champion inclusion in our product and service, where we strive to help all people achieve a happy retirement in the form of financial freedom, good health and social inclusion. We’re going to keep campaigning and shining a light on these issues. By listening to women and our customers we can drive the change they want to see in the financial industry and beyond.