Gender inequality in pension saving leads to an imbalance of finances within families and risks leaving women vulnerable at particularly sensitive times.
Mothers who have not worked, but have instead taken time to raise a family, rate their financial wellbeing worse than any other group, according to the Wellbeing, health, retirement and the lifecourse research, published in 2017 by the Pensions Policy Institute (PPI). They stand to suffer a substantial income shock should they become widowed, and should they divorce, Scottish Widows’ November 2017 Women and retirement report found that pensions are not considered in seven out of 10 cases.
In their early 60s, the median private pension wealth of women is one-third of men’s, a gap of over £100,000, as reported in the PPI’s Understanding the gender pensions gap, published in July 2019.
The largest factor causing this disparity is the reduced working patterns women take on, often to allow time for caring for children and family members. This is exacerbated by the gender pay gap, typified by the motherhood penalty, which makes it harder for women who do work to accrue pensions at the same rate as their male counterparts.
Suggestions to combat this gap have included a £2,000 pension bonus for new mothers and a family carer top up, paid while people are either not working or are working part-time to care for family. These would cost in excess of a billion pounds a year, a sum that may only feasibly be met by the government.
The effect could be to improve private pension saving by around 50% for those women whose careers are most interrupted by bringing up children; however, all this does is help insulate against one part of the gender pension gap. It will not even completely replace the missed pension for these women resulting from motherhood.
These approaches seek to prevent an opening of the gap for women not yet affected, and do not fully address the current gap into which more women will be drawn every day. This gap will be played out for decades of retirees to come, with little opportunity to be closed.
With the issue founded in working practices and pay, long-term solutions will need to integrate childcare solutions and flexible-working practices with a versatile pension system.
Ultimately, we have a pension system that developed alongside the male breadwinner model, and the repercussions of this will take years to work through.
Tim Pike is head of modelling at the Pensions Policy Institute (PPI)