Women will need to work an extra 19 years to close the gender pension gap, according to a report from pensions provider NOW: Pensions.
Earlier this week, the International Longevity Centre think-tank suggested that the UK could need to raise its state pension age to 71 by 2050 if it is to maintain a healthy ratio of workers to retirees.
A report from NOW: Pensions and the Pensions Policy Institute finds that by the time a women reach state pension age (67), they will have average pension savings of £69,000, £136,000 less than the average man who will have saved £205,000.
It claims that women make up 79% of workers who earn less than the automatic enrolment earnings threshold, currently £10,000.
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Workers qualify for auto-enrolment into a workplace pension once they reach the age of 22. If this threshold was removed, along with the minimum earnings threshold, an additional 885,000 women would become eligible for a workplace pension.
By the time a woman reaches her late 50s, she would have built up just 62% of the average pension wealth of a man. This is due to a combination of factors, including the time many women spend away from their careers to take on caring responsibilities and the high cost of childcare fees, which in 2023 reached £14,800 a year on average for a full-time nursery place for a child under two.
A 10-year interruption to a woman’s career will cost her on average £39,000 in lost pension savings, the report says.
NOW: Pensions has previously found that more than 8.6 million people – including people with disabilities, carers, ethnic minorities and single mothers – are in “underpensioned” groups.
Joanne Segars, chair of trustees at NOW: Pensions, said: “It’s hard to believe that by the time a young girl starts school at four, she will already be falling behind a boy of the same age when it comes to providing for her retirement. Yet this is the reality many girls face as they leave education and enter the world of work.
“Despite enacting some important policies in recent years to improve financial opportunities, outcomes and equity between men and women – like auto enrolment and gender pay gap reporting – our report is a timely reminder of the work that still needs to be done. We believe it can and it must.”
Lauren Wilkinson, senior policy researcher at the Pensions Policy Institute said: “By their late 50s, women have average pension savings worth less than two-thirds of men’s, with a substantial proportion of this difference stemming from inequalities in the labour market, including differing working patterns and the gender pay gap.
“While there are some pensions policy options that could be introduced to potentially mitigate the gender pension gap, it’s unlikely to significantly reduce without changes in labour market conditions and gendered divisions of domestic labour.”
NOW: Pensions’ 2024 gender pensions gap report has recommended that the government remove the £10,000 auto-enrolment trigger, which would bring more women who hold multiple jobs, work part-time or work as freelancers into the scope of a workplace pension.
It also recommends the removal of the lower earnings limit of £6,240, further consideration of pension pots in divorce settlements, and more affordable childcare provision.
The introduction of a family carer’s top-up, which would see people who take time out of work to care for relatives receive a pension payment equivalent to an employer’s contribution on the national living wage, would also improve the situation.
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