Gender pension inequalities persist despite narrowing gap

Women saving adequately on the median wage would need to work past age 100 in order to match men’s pension savings, despite record progress in closing the gender pension gap, analysis by Scottish Widows has found.

Scottish Widows' Women and Retirement 2020 report revealed that women saving adequately (a minimum of 12 per cent) on the median wage are still saving £1,300 a year less than men, meaning that a woman would have to work an extra 37 years to match men's savings.

The report also warned that this number is likely to grow as the full economic impact of the pandemic is realised.

This is despite the gender pensions gap reducing to just 1 per cent, the narrowest gap on record, with almost three in five (59 per cent) of women saving adequately, compared to 60 per cent of men.

Young women in particular were amongst those still struggling to save for later life, with just 46 per cent of those in their 20s saving the recommended minimum 12 per cent of salary, compared to 56 per cent of men the same age.

The provider emphasised that whilst this increases to almost two-thirds (64 per cent) of women in their 50s, it means that younger women will miss out on the benefits of compound interest, which can “substantially” increase their savings.

Scottish Widows managing director of workplace savings, Jackie Leiper, stated: “While we’re heartened at the record levels of saving, there’s still a mountain to climb before we reach true gender pension parity.

“Women face decades of extra working before they’ll have a pension to match that of a man’s, which is unfair and unacceptable.

“Until we can resolve structural inequalities, from the gender pay gap to the uneven division of labour at home, we will never have pension equality.”

Indeed, the report noted that despite progress driven by auto-enrolment, structural challenges continue to prevent a truly level playing field.

In particular, it noted that women are still paid less than men with a £10,800 average annual difference in median wage, which can significantly impact their ability to save.

It also considered the impact of extra commitments such as childcare, which tend to fall on women and reduce the number of hours they are able to work and limiting earnings.

Furthermore, Scottish Widows warned that these challenges are likely to be amplified by the pandemic as women are more likely to be working in shutdown industries, highlighting that 36 per cent of women under 25 work in shutdown sectors, with almost half (49 per cent) of women aged under 25 having been furloughed.

Leiper added: “In a matter of months the pandemic is reversing years of progress.

“We’re calling for urgent pension reforms that will help more women save more for retirement, including improved childcare provisions, enhanced pensions for those on maternity leave, the inclusion of pensions in divorce proceedings, and the scrapping of the auto‐enrolment minimum earnings threshold.”

This was echoed by Royal London pension specialist, Helen Morrissey, who added:
“Any narrowing of the gender pension gap is to be welcomed but we can’t ignore the fact that the system remains hugely stacked against women.

"Retirement prospects are damaged as soon as women leave the workforce to carry out caring duties and the lack of affordable childcare means many women are unable to plug the gap.

"This is an issue government must tackle urgently if this situation is to be resolved.”

Scottish Widows has previously called for a number of auto-enrolment reforms in order to protect those worst hit by the crisis, with Now Pensions also recently urging the government to scrap the earnings threshold.

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