While women in the workplace face the gender pay gap, it’s women carrying out both paid and unpaid work who could be at risk of suffering the gender pensions gap. A new report by Pensions Policy Institute, commissioned by NOW:Pensions highlights the gap. According to the research, by their 60s, the median women’s pension wealth stands at £51,100 – while the median for men is a pension wealth of £156,500. This is a gap of an astonishing £105,500.
According to the report, women live 3.7 years longer than men on average – meaning their pension pots actually need to last longer.
In order to draw the same pension income throughout their retirement, women would need to have saved around five to seven per cent more than men by retirement age.
According to the new research it’s during their 30s when the damage to women’s pension wealth occurs.
The report says that 1.2 million with dependent children are currently caring for their family and missing out on auto enrolment pension contributions.
The research shows that while the proportion of women working is at 71.4 per cent – a record-high since records began in 1971 – 41 per cent of those women were working part-time in the last quarter of 2018.
In comparison, 13 per cent of men work part-time.
The most common reason (34 per cent) for women working part-time is to allow them to balance work with looking after their children, the research showed.
Sam Smethers, CEO of the Fawcett Society, said: “Women face a double jeopardy. They both carry more risk throughout their lives and are less able to take action to protect themselves.
“The shocking pensions gap that women experience is a result of a lifetime of income and workplace inequality. If we introduced a carer’s top up for pension contributions and lowered the threshold so that more low paid women in part-time work could benefit, that could make a real difference.”
The report considers potential policy remedies for combatting the gap, which includes the idea of the introduction of a family carer’s top-up, and the removal of the £10,000 auto enrolment trigger, allowing low-income earners to be automatically enrolled into workplace pension contributions.
At the Pensions Policy Institute report launch this month, Ms Smethers spoke to Express.co.uk on the inequality – and highlighted how an overhaul in the parental leave system could help to reduce the financial gaps between genders.
Should a mother decide against taking Statutory Maternity Leave, it may be possible for a parent to get Shared Parental Leave (SPL) and Statutory Shared Parental Pay (ShPP).
“Our parental leave system is fundamentally flawed,” she said. “It’s based on a 1950s model of who cares for children, so we need to start again.
“We need longer, better paid period of leave, dedicated to dads: a use it or lose it period of leave, similar to what they have in Sweden.
“We need better paid maternity leave too,” the CEO of the charity which campaigns for gender equality and women’s rights at work, at home, and in public life, said.
Addressing maternity pay, she said: “We need to up that rate, and then we need a period of time that parents can share, where they can choose between them who’s going to take that period of time.
“So we need a holistic system that actually presumes equal responsibility between parents of who’s going to care for this child, but gives parents unconstrained choice.
“At the moment, they’re massively constrained by what they can do because it’s all about, ‘Well what’s the rational financial decision?’”
Giving an example of a dilemma that parental units consisting of a mother and father may face, Ms Smethers continued: “She is going to get much less pay when she goes back to work and he’s earning more, it makes sense for him to be in work and her to be at home, but the only way we can redress that is to give him better paid leave for a period of time.
“That enables him to bond with the child, spend more time caring. That also takes away the additional risk factor of her as a pregnant woman at work being so vulnerable to pregnancy discrimination, because actually they’re going to be less able to predict who is going to be the one to take time out.
“So there’s a whole host of reasons why that’s going to be a good idea. But the other factor is to do with pensions.
“Women when they have babies, see their pay drop. They [typically] take time out of work. Their pension contributions take a big hit. So we would change that and make it more equal. They would also then be able to get back into work more quickly.”
Five-point plan for fairer pensions, according to NOW:Pensions
1. Removal of the £10,000 auto-enrolment trigger to get more women into auto-enrolment
This would bring an additional 1.4 million women in pension saving.
2. Auto enrolment contributions on every pound of earnings
This would improve pension part-time workers who are more likely to be women. This would increase pension wealth by 140 per cent at retirement.
3. The introduction of a family carer’s top up
Women taking time out to care are compensated in the State Pension by State Pension credits, however, they miss out on auto enrolment. The family carer’s top up would see the government pay the equivalent of the employers’ contribution at National Living Wage level into women’s pensions who are taking time out to care. This would equate to approximately £820 per year and would boost women’s pension outcomes by 20 per cent. The family carer top-up can close around half of the pension wealth gap created by taking time out of work to care for family.
4. Ensuring that pension funds are always considered in divorce settlements
Approximately 10 per cent of men and 14 per cent of women in their early 60s are divorced. The median pension wealth of divorced men and women by retirement is £103,500 and £26,100 respectively. These figures compared to the population indicate a pension wealth reduction of a third for men but a half for women, signifying a greater impact of divorce for women than men.
Although pension pots can often be the second most valuable asset when people are going through a divorce, they are often overlooked, with people paying more attention to property assets.
In 2018, there were 118,142 divorces but only 4,632 pension attachment orders were made by the family courts.
5. Greater action on the availability and cost of childcare to enable those that want to return to work
Despite tax changes that help families with childcare costs, prices continue to rise. The Family and Childcare Trust reported in 2018 that childcare prices for children under three had risen above both inflation and wages in the previous year. Costs grew by 7 per cent to £122 for 25 hours per week, equating to £6300 per year. Analysis of freedom of information request data by Insurer Royal London shows the high cost of childcare means working parents with toddlers pay more for childcare than their mortgage. A full-time nursery place for a child under two typically costs £1,065 a month, for example, while the average monthly mortgage repayment is £1,040 and the equivalent figure for renters is £833.