Gender pensions gap: Why are women left behind when it comes to retirement?

The theme for International Women’s Day 2023 is embracing equity. It’s a message we’re passionate about at LifeSight.

“Equity,” as the International Women’s Day organisation explains, “can be defined as giving everyone what they need to be successful.”[i] And on International Women’s Day and every day, we are committed to enabling every single member to achieve the best retirement outcome for them.

However, when it comes to retirement adequacy in the UK, many women are being left behind.

Recent research conducted by the Pensions and Lifetime Savings Association found that without change, more than 50% of all pensioners will not meet the retirement income targets set by the 2005 Pensions Commissions[ii] – with women affected worst of all. As many as 1.2 million women have no private pension whatsoever, and the average woman’s pension savings are calculated to be £51,500 by their 60s, compared with £156,500 for men.[iii] This stark comparison reveals that a huge number of women may not have a financially secure retirement.

But why? Gender-based wealth disparity comes down to differences in wages, work patterns and financial literacy levels.

Caregiving responsibilities, such as looking after children and older relatives, are far more likely to fall to women than men. These unpaid roles often drive women’s decisions to work part-time or take career breaks, meaning lower pay and slow career progression. As a result, women have less disposable income – for living, and for saving for the future.

The pandemic has exacerbated this, with women shouldering the lion’s share of unpaid care while children were not at school. According to the International Labour Organisation, more than 2 million mothers globally left their jobs during 2020, partly to prioritise their caregiving roles.[iv]

The European Commission is working hard to close the gender pay gap, which currently stands at 8.3% in the UK.[v] The EU Pay Transparency Directive should come into effect in 2024, which calls for equal pay for equal work. However, while this is a great step forwards, it doesn’t ease the impact that caregiving responsibilities have on women’s careers.

Gaps in financial literacy also widen the divide between men and women. Women, the WTW Wealth Equity Index reports, have lower financial awareness, investor confidence and risk tolerance throughout their careers.[vi] This is hardly surprising, as less money means less ability to take risk.

Together, these factors increase the difference in women’s financial health at retirement.

LifeSight’s unwavering commitment to embracing equity makes a difference.

We are supporting women members by providing tools and resources that increase financial literacy, helping them to plan for and thrive in retirement. These include:

Boosting awareness of these issues by creating timely, targeted nudges.
Providing a financial wellbeing hub of resources to help every single member make the smartest choices for their individual circumstances.
Running relevant and accessible educational seminars.
Having conversations and reporting to our clients to engage and educate them on the ‘gap’.

Change is coming. As the gender pay gap decreases and legislation like the EU Pay Transparency Directive comes into effect, women are on their way to financial equality – and we’re proud to play a small role in this. This year and beyond, we’re standing for equity by educating, engaging and empowering women to be more financially be more financially fit, confident about risk, and to be able to retire better. Thanks for joining us on that mission.

Want to learn more?

www.insuringwomensfutures.co.uk/
www.retirementlivingstandards.org.uk/

[i] Equality versus Equity: What’s the difference as we #EmbraceEquity for IWD 2023 and beyond?
[ii] Improving pensions adequacy
[iii] Improving financial resilience and retirement adequacy for all
[iv] Over 2 million moms left the labour force in 2020 according to new global estimates
[v] Gender pay gap in the UK: 2022
[v] Gender pay gap in the UK: 2022
[vi] Europe: Global Gender Wealth Equity Index