Why impacts women saving for their future?
The gender pay gap, which is currently around 7% in the UK, already disadvantages women’s future finances because it means they are more likely to be contributing less to their retirement savings than men, and the gender pay gap rises in workers over 40. This already unlevel playing field is made worse by typical events that happen over the course of a woman’s life, which make it more difficult for them to save for the future.
This includes life events such as:
Why do these issues affect women’s ability to save for their retirement?
Career breaks for caregiving
Women are more likely than men to take time off work or reduce their working hours to care for children or elderly relatives. The 2021 UK census shows that women account for 59% of all unpaid carers. These career breaks can significantly impact earnings and, consequently, reduce their pension contributions.
Part-time work
In the UK around 38% of women work part-time, compared to 14% of men. This is often due to the caring responsibilities that disproportionately fall on women. Part-time roles often come with reduced salaries and reduced pension contributions, which can further exacerbate the pension savings gap. On top of this women are more likely than men to fall under the pension auto enrolment threshold (35% vs 11%).
Lower financial literacy
Often when considering reducing working hours, women don’t receive advice about the impact this could have on the pension savings. Our research found that over half (55%) of women would like to receive more information about their workplace pension from their employer. Also many women may not feel as confident navigating financial products and investment strategies. A lack of information and support can lead to missed opportunities for pension savings and investment growth.
What can be done to close the gender pension gap?
Addressing the gender pension gap requires multi-faceted approaches at both policy and personal levels.
Increase access to flexible work
Encouraging employers to offer flexible working arrangements can help women balance work and family commitments. Increased flexibility can reduce the need for career breaks and allow for more consistent pension contributions.
Increase access to careers guidance
Finding the right next job isn’t always easy, and the support of skilled career guidance professionals can make a huge difference. Yet adult career guidance is still lacking and hard to access, despite the fact that existing adult workers (rather than new school and college leavers) will make up the overwhelming bulk of our future workforce. Helping everyone, including women, to access career support and guidance later in their careers will help people to find the right work that suits them, enabling them to continue saving for their retirement.
Enhance financial education and support
Providing targeted financial literacy programs and resources for women can empower them to make informed decisions about their pensions. Employers should also ensure women receive relevant information about their workplace pension, especially the impact reducing working hours will have on their pension contributions.
Pension policy reform
Policy changes should be made to help close the gender pension gap. These include:
- Widening the coverage of auto-enrolment by lowering the age and earnings eligibility threshold.
- Reviewing the advice and guidance boundary so that a larger population can access tailored and reliable financial support.
- Legally requiring employers to provide information on how contractual changes, like reducing working hours, impact pension contributions.
Encourage employers to take action
Employers play a crucial role in narrowing the gap by offering equal pay for equal work, providing parental and caregiving leave, and ensuring career advancement pathways for all employees.
Closing the gender pension gap will enable women to save for the retirement they want
The gender pension gap is a significant challenge that affects women across the UK, hindering their financial security in retirement. Addressing this issue requires collective efforts from individuals, employers, and policymakers. At Phoenix Group, we are committed to raising awareness about the gender pension gap and supporting long-term savings solutions that empower everyone to achieve a secure retirement. Together, we can work towards a fairer future for all.
