A recent report from the Pensions Policy Institute (“PPI”) shows that the average private pension wealth for a woman in her early 60s is one third that of a man. Furthermore, there are 50% more women than men heading towards retirement without any private pension savings. 1.2 million women in their 50s have no private pension wealth which represents approximately 5% of all women.
This inequality is the product of a number of factors: the gender pay gap, women’s lower historic access to workplace pensions and their time out of the labour market to care for children and other family members. The scale of this problem is also made worse by the fact that on average women live longer and therefore need bigger pension pots than men.
Changes in the pension system have tried to address some of these causal factors. For example, the introduction of auto-enrolment in 2012 made it a legal requirement for employers to automatically enrol eligible members of staff into a workplace pension scheme. Overtime this will help more women to build up retirement savings but there are still barriers to overcome.
According to the PPI: “1.2 million women (in relationships) with dependent children are currently looking after their family and are missing out on automatic enrolment pension contributions. This proportion of women are therefore not in paid employment and hence are not receiving contributions to their pensions under automatic enrolment. An additional 1.4 million mothers with dependent children who are employed do not earn above the £10000 threshold to qualify for automatic enrolment contributions”.
The governments Auto Enrolment review in 2017 did set out a recommended package of reforms which included starting minimum contributions from the first £1 of earnings, rather than being payable only on a higher threshold. However, the introduction of this reform remains vague. At the time of the review the government expected to introduce this by the mid-2020s.
The PPI however suggest more challenging policy strategies including increasing auto enrolment contributions, tax relief, and introducing family carer top up pension contributions alongside NI Credits towards a state pension.
Whilst a better understanding and awareness of gender pension differences is helping to focus more attention on the need for further reform, early action on pension saving is vital to safeguard today’s younger women from a prospect of financial hardship in retirement that far too many older women are facing today.
For more information and advice about how you can plan for retirement,
please call us on 01344 636337