What is the Gender Pension Gap?

The average woman has less retirement savings than the average man1. The difference between these two amounts is called the GENDER PENSION GAP. Wow! I have 3 children – 2 of them are girls. So my first thoughts on the gender pension gap is whether this means that my daughters are likely to end up with less money than their brother to see them through their retirement. And given that, statistically, women live longer than men,2 is this an even greater disadvantage to all of us females?

Will we basically have less money to see us through a longer retirement than men?

How big is the Gender Pension Gap?

There is a lot of research out there about this gap, and it looks very different depending on who and how it is measured. In 2021, Legal and General analysed their 4 million pension scheme holders and found that, by retirement, the Gender Pension Gap reaches 56% - that means the average size of a woman’s pension pot at retirement is 56% less than the average for a man

Why is there a Gender Pension Gap?

The first thing to understand is why there is this gap to start with. There is a Gender Pay Gap. Whilst a lot of work is being done to reduce this gap, if women are earning less than men, they will be contributing less to their pensions. Hence a big reason for this gap.

Women are also more likely to take career breaks to look after children and/or family members. There are also more female carers, so even those that do work are more likely to work fewer hours or progress through their careers due to their caring responsibilities. Lesser known reasons why there is this gaping hole between retirement pots of different genders include 

• Women tend to be less likely to live with parents vs young men 
• Women can spend a larger percentage of their salary on rent vs men, as well as the belief that a first home is likely to be a greater percentage of a woman’s salary than for men
• Average care costs for women are generally thought to be higher
• Costs of childcare tend to fall more on women’s shoulders and therefore reduces their ability to contribute into their pensions - Menopause struggles can lead to women giving up work, and I have met quite a few women that really relate to this point
• Divorce tends to have a greater impact on women’s pensions than men
• And women tend to take out less protection against themselves and their income, meaning that if something should happen to them and they are too sick to work, they could find it harder to contribute into their pensions than someone who has protected themselves (via income protection or critical illness cover)

Why is it so important to close this gap?

Having enough money to see you through retirement is really important. There is a tendency for us to prefer to reward ourselves immediately rather than save for our future, but as the costs of living rise and we are living longer, we need to make sure we do not run out of money in the later years.

We all work really hard to earn our money, and therefore making sure we get a well-deserved and well-rewarded rest when it comes time to retire is something that everyone needs to prepare for. In the 2021/2022 tax year, the full state pension pays out £9,339.20 per year. Ask yourself whether that would be enough to allow you to enjoy the standard of living you are hoping to achieve. In fact, when in comes to the state pension, not everyone will receive the full amount and many people will receive a significant amount less.

Another reason it is so important to close the gender pension gap is when it comes to later life care and medical bills. Men spend an average of 62.9 years in good health and 16.5 years in poor health, according to official figures from the Office for National Statistics

2. By contrast, women spend an average of 63.3 years in good health and 19.8 in poor health.

This data was compiled for the period 2017-2019 and so pre-dates the COVID-19 pandemic, so there is a chance we will see the differences increase once data comes out to include Covid. Since women have less pension funds to see them through retirement, the news that they are likely going to have greater medical bills than men gives greater reason for this gap to be closed. How can we close the gap?

But please do not despair!

Yes, there is a gap, and yes, it feels like there is a lot against us women to close the gap, but there are many ways we can work towards a more even balance. Here is my checklist to help you work towards closing the gap:

• Check your State Pension Entitlement via this link - https://www.gov.uk/check-state-pension
• Keep track of your National Insurance Contributions
• Do you have a child under 12? If so, your national insurance credits may be able to be paid for you (whether or not you receive child benefit)
• Track down all your previous pensions – know what you have, how much it is worth, and whether it is invested appropriately for you
• Review your protection insurance and make sure it is suitable for you, your family and your future
• You can contribute into your pension, even if you are not earning (and you can still receive tax relief) – your partner or spouse can contribute into your own pension as well - Include pensions in divorce discussions
• Look after the next generation – start a children’s pension
• Know your number – how much do you have in retirement savings and what type of lifestyle do you want to lead in the future?
• Speak to a professional, like myself, to put together an achievable and understandable plan that makes sense for you

I am passionate about closing the gender pension gap, and with the work I do, I aim to help reduce the gaping hole even if it is one woman at a time.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested. The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

1 Legal & General Investment Management analysis of approximately 4 million pension scheme members, July 2021

2 Health state life expectancies, UK: 2017 to 2019, Office for National Statistics, 25 January 2021

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