Working part-time to balance caring responsibilities has the biggest impact on women’s ability to save for their future, according to a new report “Facing an unequal future – closing the gender pensions gap” published today by NOW: Pensions, which is based on research by the Pensions Policy Institute. The research shows that this results in a 47 per cent reduction in women’s pension wealth, compared to men by their late 50s. Findings suggest that this has a bigger impact than the gender pay gap, which cuts women’s pension savings by 28 per cent. On average, women currently earn approximately 18 per cent less than men.
By their 60s, women have on average £51,1000 in their pension, which is a third of an average man’s £156,500 pot, according to the calculations.
However, with the average life expectancy of women being 3.7 years longer than men, the analysis suggests that in order for women to draw the same pension income throughout their retirement, they would need to have saved between around five per cent and seven per cent more than men by retirement age.
According to the report, the proportion of women working now stands at 71.4 per cent – the highest female employment rate since records began in 1971.
However, 41 per cent of these women were working part-time during the last quarter of 2018 – compared to 13 per cent of men.
Joanne Segars, Interim Chair of Trustees NOW: Pensions said: “Pension saving can be difficult, especially for women.
“Not only are women typically paid less, but they are much more likely to work part-time or take time out of the workforce to care for children or elderly relatives.
“This time out of the workforce has a huge impact and the part-time pensions penalty can’t afford to be ignored.
“Policy and regulation around saving for retirement need to change to better reflect the changes in the workplace and society.
“Small changes to auto enrolment could make a big difference for women but to really to bridge the gap more needs to be done to help Mums remain in the workforce.”
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.”
According to research conducted earlier this year by NOW: Pensions, involving 1,000 female part-time workers and 250 female homemakers, three in 10 part-time workers don’t believe that their part-time hours will affect their pension pots.
Meanwhile, two in five part-time workers (41 per cent) accept that they will have less saved, while 18 per cent of people have said that they will combat the shortfall by working longer.
The study saw 11 per cent of respondents reveal that they’re planning to save more in the future.
Approximately 10 per cent of men and 14 per cent of women in their early 60s are divorced, a statistic which is looked at in the report.
The research shows that the median average pension wealth of divorced men and women by retirement is £103,500 and £26,100 respectively.
This indicates that divorced men are approaching retirement with around a third less than might typically be expected, while divorced women face around half the average amount for their age group and gender.
Laura Suter, personal finance analyst at investment platform AJ Bell, said: “Women face a more than £100,000 pension hit in retirement, as they save less throughout their lifetime than men. We’ve long known that women’s pension savings are hit by a combination of the gender pay gap, part-time working and the increased burden of childcare costs, but these new figures lay bare the scale of the problem.
“Our own research highlighted the impact that working part-time or taking career breaks can have on a woman’s pension pot – with women missing out on £25,500 when they take two year-long career breaks, while those who take a the same two-year break and return to work part-time will miss out on more than £100,000 in their pension pot.”
These figures are based on a woman earning the average UK salary with a five per cent pension contribution from their employer and five per cent from the employee, assuming four per cent a year investment growth after charges, while part-time working is based on being paid for four days per week.
Ms Suter continued: “Women face a triple whammy when it comes to their pensions: first, they are not saving enough, second, they are not investing that money and so are missing out on higher returns over the long term, and third, they live longer and so on average need bigger pots than men at retirement.
“Raising awareness of the pension gap is the first step. Employers also have a role to play in highlighting the benefits of maintaining pension payments throughout maternity leave, and offering enhanced pension packages for these women.
“For women dealing with low maternity pay and high childcare costs, cancelling pension contributions may seem like a small amount of money in the short term but the compounding effect of investment returns over the long period until retirement means that the effect of stopping contributions snowballs.
“The research also found that 1.2 million women are full-time carers for children, and so aren’t eligible for auto-enrolment, while another 1.4 million working mothers earn less than the £10,000 threshold for auto-enrolment to kick in.
“These individuals can actively opt-in themselves, but the Government needs to fix the system to give all of them tax relief, as currently anyone contributing from their net pay will miss out.”