Scottish Widows publish a gender pension gap report each year, and what they found (again) was that women were disproportionately impacted by the rising cost of living compared to men. This gap is slowly narrowing, but it is clear that more needs to be done.
The gender pension gap is caused by a range of factors, many of which are rooted in societal structures. For example, many women take time out of work to raise their families, which can lead to reduced hours and part-time work to manage childcare. These factors can result in a divergence from men in their career prospects and earnings potential, which can have a long-term impact on their lifetime income and, as a result, their workplace pension savings. Additionally, women typically live longer than men and have greater social care needs, which means that their pension pot needs to stretch further.
The current cost of living crisis has made it even harder for women to close the gender gap in retirement preparations. Women are much more likely than men to be concerned about rising household bills and are taking subsequent action to mitigate their outgoings, such as cutting down on essentials like food and utilities. Single mothers are a particularly financially vulnerable group.
Another factor to consider is that societal structures often mean that more part-time roles are filled by women. The way auto-enrolment is structured means that many part-time workers miss out on pension contributions (due to contributions only being payable when an employee’s pay breaches a threshold – currently £833 a month), which contributes to women having smaller pension funds when they retire.
According to the Scottish Widows Retirement Report, more can be done to help close the gender pension gap through communication and engagement. One solution could be to target individuals and encourage them to review their contribution levels to ensure that they are appropriately preparing themselves for taking benefits. This approach would help highlight how women can build up their pension funds. Another focus could be on how to access benefits. This needs to differ for men and women (due to women’s higher life expectancy). It’s not appropriate to base retirement plans on the experiences of previous generations because in the last 20 years, we have seen significant changes in how to take benefits, state pension equalisation, and a move from partly earnings-related state pension provision. There needs to be more focus on helping women engage with their pension provision.