But have you heard of the Gender Pension Gap? Yep, even our pensions are affected by gender disparity. It’s causing many women to feel uncertain and rethink their retirement age and plans, and take up part-time work instead. Let’s take a look at the causes and effects of the Gender Pension Gap and how we can navigate it.
What is the gender pension gap?
Let’s begin with a simple definition of what the Gender Pension Gap is. The Gender Pension Gap refers to the inequality of pension funds at retirement age based on gender. Currently, men have 38% (roughly £7000) more pension wealth than women. Pension providers Now Pensions have reported a difference of up to 154.9%. Scottish Widows have also shared that their data shows women are retiring with £123,000 less than men.
To clarify, the Gender Pension Gap in the UK is significantly larger in private pensions rather than state pension funds. Currently, both men and women receive around £185.15 per week as a state pension, depending on an individual’s National Insurance record.
You may think the Gender Pension Gap is a problem for the older generation, but it affects women of all ages. Today, 25-year-old women are set to retire with £100,000 less than their male peers. To equalise their pension income, young women would need to work until the age of 81. Addressing the issue now means more can be done to close the gap and support women through retirement.
Are the Gender Pension Gap and the Gender Pay Gap the same thing?
The Gender Pay Gap and Pension Gap are undoubtedly related. When women earn less than men, on average, this means they have less money to save for retirement. However, the Gender Pension Gap is actually much larger than the Gender Pay Gap. The UK Government estimates an 8.3% difference in earnings between men and women. So, for every £1 that men earn women make 85p.
Compare the 8.3% difference in earnings between men and women to the 38% difference in pension wealth and you can see the Gender Pension Gap is much larger. The Department for Work and Pensions states that the Gender Pension Gap is: ‘significantly larger than the Gender Pay Gap and applies to a large (and growing) proportion of the female population’. (Written evidence from Prospect (PSL0025), 2022, at p.7). So why aren’t people talking about it? It could be that it is much more complex than the Gender Pay Gap. Earning less for doing the same job means saving less in your private pension, but there’s more to it than that.
What are the causes of the Gender Pension Gap?
The UK Parliament outlines the main reason for the Gender Pension Gap to be the imbalance in care duties between men and women. Women are 7 times more likely to spend time out of the labour market to care for young children or relatives. Undertaking unequal care responsibilities means women aren’t earning a salary nor qualifying for a private pension scheme.
Other reasons why women may struggle to pay into their private pension include:
- The Gender Pay Gap – to put this plainly, as women earn less than men on average, they have less money to set aside and save.
- Auto-enrolment of pension – Anyone earning £10,000 or more is automatically enrolled onto a pension scheme. For people who are self-employed, on part-time contracts or low wages, this means they are likely to miss out on a workplace pension.
- National Insurance inequality – According to TUC the historical differences in National Insurance have left women with lower state pensions.
Understanding the causes of the pensions gap provides insight into what changes we can implement to decrease the Gender Pension Gap.
How is the Gender Pension Gap affecting women today?
The Metro has recently reported that the Gender Pension Gap UK is making women approaching retirement anxious. We’re all feeling the pinch of the cost of living crisis, but for mature women, it’s caused added concern and stress and some to fear they won’t be able to retire.
Women who have retired are feeling compelled to seek alternative ways to fund their retirement, such as working part-time. Just like many of our GrandNannies.
The Metro also highlighted the following:
- Women born in the early 1950s, who have reached pensionable age, have private pension incomes around 45% lower than men.
- Only 29% of women feel they will retire at a desired age, compared to 40% of men.
- Just 26% of women have savings and means to sustain their lifestyle after retirement.
You may feel frustrated and even shocked when reading about this and hearing how distressed women are feeling about the cost of living crisis and the impact this will have on their pensions. This is why we must prevent pensions from becoming a luxury for women. To reduce feelings of anxiety, action needs to be taken to shrink the Gender Pension Gap. Plus, more help is needed to find mature women fulfilling part-time work.
What can I do to boost my pension?
GrandNanny offers mature women the opportunity to supplement their pay through empowering roles. You can turn your life experiences into demonstrable/employable skills, and find fulfilment in childcare duties. Working part-time gives you flexibility and is a great way to earn some extra income.
GrandNanny offers women (and men) the opportunity to utilise their skills and experience, from professional or personal childcare work, and re-enter the workforce. Think you fit the bill? Sign up to become a GrandNanny and enjoy the benefits, today.
4 ways the Government are closing the Gender Pension Gap
“Things are moving far too slowly”, says the trade union Prospect. “We are currently condemning generations of women to significant financial inequality in retirement. It is simply not good enough.” So, what can be done to close the gap in retirement income?
The House of Commons outlines the following proposed reforms to close the Gender Pension Gap:
- Provision of affordable childcare for preschool-aged children.
According to the House of Commons, unpaid care work is the main cause of the Gender Pension Gap in the UK. On top of that, current costs for childcare are preventing women from returning to work. Making sure childcare is affordable and accessible to everyone is key to tackling the Gender Pension Gap.
The People’s Pension’s 2020 paper on the Gender Pension Gap states that the majority of women reduce their working hours or stop working altogether because they want to spend quality time with their children. However, many women admit their decision is largely based on childcare costs. It doesn’t make financial sense for a lot of women to continue working when a large portion of their wages are spent on childcare.
People’s Partnership emphasises that 4 out of 10 women who work part-time would be able to increase their hours at work and increase their earnings if childcare was cheaper.
2. Make pension rights a compulsory part of divorce proceedings.
It is thought that the court can order a spouse with a greater pension provision to provide a capital transfer to the spouse with less. However, these orders are the exception, not the rule. Approximately 4 out of the 10 divorces in the UK each year proceed with pension sharing. Making pensions a compulsory aspect of divorce proceedings and encouraging spouses to take legal and financial advice will contribute to closing the Gender Pension Gap.
3. Reduce the earnings trigger under automatic enrolment in a workplace pension.
More women than men tend to be excluded from automatic enrolment due to the earnings trigger. As it stands, automatic enrolment determines who is eligible for a workplace pension. This policy means that three million women are locked out of a workplace pension because they do not meet the criteria. Reducing the earnings required for enrolment would enable women to access a pension scheme.
4. Advocate for gender equality and eliminate gender bias.
Eradicating gender bias on a macro level would suppress gender discrimination, and help reduce the gender pay gap. The government, businesses, and individuals need to actively oppose gender prejudice.
How GrandNanny is helping close the Gap
For women over 50 wanting to return to work or top up their pension pots, we offer flexible working hours. If you sign up to be a GrandNanny, you’ll gain employer’s National Insurance contributions and pension management and contributions. Currently, we offer pensions through Nest and depending on your earnings, you will be automatically enrolled on to a workplace pension scheme. If you fancy joining us, signing up is quick and easy.
If you’re wishing to return to work but struggling to find affordable childcare, GrandNanny offers a solution. By employing local, mature childcarers we offer a unique service that works for you. You can find a breakdown of our costs on our pricing page. You can find out more by looking at our process page and reading through our FAQs.
If you’re worried about your pension, Now:Pensions offer financial advice and Citizens Advice can provide further help. If your financial situation is affecting your mental health and well-being, Mind has a helpful list of tools and resources that are available/provide support.