Women in their late 50s have around 50 per cent less pension savings than men

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Women in their late 50s have around 50 per cent less pension savings than men, according to new research published today.

The research, conducted by the Pensions Policy Institute (PPI) and sponsored by the Defined Contribution Investment Forum (DCIF), found that as a result of this gender savings gap, women will experience lower standards of living in retirement on average than men and a higher chance of suffering deprivation or poverty in retirement.

The gender pensions gap – can it be closed?, outlines the factors which contribute to the gap in pension savings between men and women and looks at how these factors may change in the future. The Briefing Note acknowledges that the introduction of auto enrolment is bringing more women into pension saving, and goes on to suggest possible investment and policy solutions to help close the gap further and more quickly.

The main driver behind the gender pensions gap is the result of differences in working patterns, as women are far more likely than men to leave the labour market or work part time in order to provide care to children or other family members. In 2018, 1.81 million women were economically inactive because they were looking after family or home, compared to 223,000 men.

Other significant factors are the gender pay gap and behavioural factors. Women are less confident, on average, about making financial decisions. Only 24 per cent of young women are very confident in managing financial decisions compared to 48 per cent of young men. Women are also more risk averse than men and are more likely to choose “safer options” when given financial options. An additional factor is that women over State Pension age currently receive less from the State Pension than men.

Women tend to earn less than men and are less likely to be promoted; the ONS’s 2018 Gender Pay Gap report revealed a gap of approximately 18 per cent less than men’s. Women who take time out are less likely to experience the same pay progression rates as men and are more likely to work in lower paid jobs.  Women are also less likely to make pension contributions for years when they are not working, so they find it even harder to build up adequate retirement savings.

Vivek Roy, the DCIF’s chair, said, “While the gender pay gap is frequently in the public eye, fewer people are aware that a gap also exists between men and women’s pension savings.”

“We are delighted to have worked with the Pensions Policy Institute to draw attention to this important issue.”

“This paper considers how the gap has arisen and considers how to close it.”

“The good news is many more women are saving into pensions as a result of auto enrolment.”

“However, the industry can take some important steps to close the gap, such as making sure that women are well-represented on decision-making boards, meaning that their vital input will filter into every stage of the savings journey.”

Daniela Silcock, head of policy research at the PPI, added, “While the gap between men and women’s pension incomes is narrowing due to policy and demographic changes, a pension gap is likely to remain unless other structural changes take place.”

“Potential levers involve both government and industry, and range from restructuring investment offerings to better account for women’s higher life expectancies, to changing the makeup of trustee boards in order to ensure that the needs of all vulnerable groups are given higher prominence.”

Alison Simpson
About the author

Alison is the Digital Content Editor for WeAreTheCity. She has a BA Honours degree in Journalism and History from the University of Portsmouth. She has previously worked in the marketing sector and in a copywriting role. Alison’s other passions and hobbies include writing, blogging and travelling.

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