Gender pensions gap widens as Covid-19 worsens financial inequalities

The gender pensions gap for over 55s has widened to more than £180,000, despite women on average contributing more into their pension pots than men, according to analysis from the Centre for Economics and Business Research (Cebr) and More2life.

The research revealed that the gender pensions gap could be as high as £183,936 when taking life expectancy into account, with men expecting an annual retirement income of £20,712 and women anticipating an income of £14,964.

This is despite the fact that women are currently contributing an average of 9.4 per cent of income into their pension pot, compared to 8.3 per cent for men, with More2life highlighting this as evidence of the true impact of the gender pay gap on retirement income.

Indeed, it found that the average woman would need to work an additional 14.5 years to catch up with men, as, based on the average earnings of each gender in 2020, men were able to contribute around £3,184, while women were only able to contribute £2,340.

In addition to this, the analysis found that women have lower incomes in retirement across all lengths of their working life, as men who have worked full-time for 30-34 years receive the highest average annual retirement income of £22,776, while their female counterparts receive £17,004.

The widest discrepancy, however, was amongst those who have worked for more than 50 years, as the research found that of these individuals, men significantly more in retirement income than women, receiving £19,404 in retirement income compared to £11,592.

The research suggested that this may be due to people on a lower income working for longer to support themselves and, as a result, saving less for retirement, such as women who may have taken part-time roles to fit around family commitments.

More2life chief executive officer, Dave Harris, commented: “Although women appear to be better at saving into their pension, they still face a retirement that is less comfortable and financially secure than their male counterparts.

“The stark difference in retirement incomes highlights the need to address the root causes of financial gender inequality and better support women as they make choices around how to use their assets both in the lead up to and during retirement.”

Today’s estimated gender gap of £183,936 also represents a “sharp increase” in the difference between men and women’s retirement income compared to last year, with previous research from More2life suggesting a pension gap of £157,263.

The firm suggested that this gap is likely to have widened due to the pandemic and its impact not only on the value of pension pots but the ability of over-55s to save into them.

This was supported by findings showing that 30 per cent of women thought their financial situation had worsened since the start of the pandemic, hampering their ability to save for later life, compared to 24 per cent of men.

Previous research has also suggested that women have been amongst the hardest hit during the pandemic as they are more likely to work in sectors most impacted by Covid-19, and were therefore more likely to have been made redundant or furloughed.

Harris commented: “Today’s figures are another alarming wake-up call about the gender disparity in retirement. It’s clear that the Covid-19 pandemic has caused significant disruption to many people’s retirement savings, but the impact has been most acutely felt among older women.

“As we begin to think about what a post-Covid society looks like, it’s vital that the industry and government does more to encourage women to engage with long-term financial planning.”

“Raising awareness of alternative retirement income sources, such as property wealth, is crucial in ensuring current and future retirees can enjoy the retirements they deserve.

“There are a range of products on offer in the later life lending market, including equity release, which has proven to be a popular solution for older homeowners looking to unlock the wealth tied up in their homes to fund their retirement.

"For women, exploring such options could offer greater financial stability in later life and help to manage the impact of the retirement gender gap.”

Adding to this, Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, described the findings as "concerning", warning that women were struggling to recover financially in the current environment as a result of redundancy and furlough.

“However, there are things that women can do to plug the gap. It’s not too late to make a difference to your pension value by continuing to contribute after the age of 55," she stated.

"State pension and benefits also form an important part of your retirement income and so you should check what you are entitled to and whether there are any gaps that need to be filled.”

Indeed, the analysis found that the "overwhelming majority" (75 per cent) of over-55s relied or expected to rely on their state pension, with this similarly felt between men and women.

It also found, however, that the majority (59 per cent) of widows aged over 55 felt they had lost out on pension income as a result of their partner's death, while 84 per cent of men stated that they had not lost out on pension income after their partner passed.

This is perhaps unsurprising, given that the research also found that only 35 per cent of women had independent pension wealth, compared to 47 per cent of men, while 18 per cent of women jointly owned this with their partner.

The findings also follow warnings that the financial shock of widowhood may be far greater than couples realised, after analysis from LCP revealed that women could expect a much greater fall in their standard of living than in the past.

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