January 12, 2024

Why women are only worth a third of men

That is a shocking statement, isn’t it. Well here is why - You may have heard about the gender pay gap?!

Well there is also a PENSION gender pay gap which is quite often overlooked.

Most women save only a third of the amount that men do by the time they approach retirement. A THIRD!

Men have almost £49,000 in their pension pot compared to just over £32,000 for women, according to AJ Bell’s latest Money Matters report. The study was conducted along 4,000 UK adults in June 2023 and was based on parents working full-time before having a child.+

Taking time out of work (i.e. maternity leave or working part-time to look after family) contributes to about two thirds of the difference, with the gender pay gap accounting for the rest.

Here we summarise the key points about the gender pay gap regarding pensions, as to why this happening and how you could potentially change things for the better…

The gender pay gap heavily influences pension pots, as employer contributions are often based on a % of salary – so if you earn less, you will get less paid into your pension.

Many women stop contributions while on maternity leave, in an attempt to make ends meet (whilst their partners continue to fund their pension pots).

It can be hard to restart pension contributions if you don’t return to the workforce– because if you don’t have cash coming in, what can you pay into a pension?

Long career gaps, with little or no pension saving for years, are a massive disadvantage for women.

Those returning to employment are generally on a lower salary – reducing those employer contributions even further.

Those starting a new self employment after maternity leave often don’t prioritise pension contributions.

Women make up the majority of part-time workers in the UK, and, according to NOW Pensions: The Gender Pensions Gap Report 2022, women would need to work an additional 18 years in full-time employment to save the same amount of money into their pension as a working man. The report also highlighted that just 27% of women work mostly full-time throughout their careers, compared to 45% of men. Women typically spend 10 years away from the workforce to start families and care for children and relatives. This 10-year gap contributes to both the gender pay and pensions gaps as women who spend time away from the workforce have fewer opportunities for career progression and higher salaries.

Women are experiencing a pension gap built on a lifetime of inequality.

The recent study from AJ Bell’s latest Money Matters report suggested that men prioritise their pensions far more than women, but women live longer than men, which means "they should actually have a bigger pension pot”. Yet, half of women have never paid more into their pension than the minimum requirement. In fact, women are also more likely to not have engaged with their pension at all - a third said they had no idea how much was in their pension pot.

Half of women said they were not confident that their pension pot would enable them to live comfortably when they retire.

Another way women often suffer is in divorce settlements.

We’ve explained that women have habitually forfeited their earning potential in order to focus on the family, however should that marriage fail down the line they are left with the double whammy of not only having a lower pension but also missing out on the higher pension pot that their sacrifice has allowed the main earner to build up.

When it comes to financial separation and divorce, divorced women suffer from low levels of homeownership – 49% own homes compared to the UK average of 65%. We know that people who rent face higher housing costs and more financial instability compared to homeowners.

Then there’s the income challenges: 34% of divorced women work part-time, and many of those jobs are in low-paying occupations. Combine this with the cost of childcare and we begin to get better understanding of the reasons behind gendered divorcee pension inequality.

Pension pots are typically the second-largest asset, after property marriage, but women are often walking away from divorces short-changed. Research shows that less than two in ten divorces have a pension sharing order which means that women are reaching retirement age with just 12% of the pension wealth of men. As a consequence, women are reaching retirement age with just £26,100 compared to aman’s pension wealth of £205,800. That is a difference of £179,700.

Not forgetting that single women face higher costs from living longer.

Single women are saving less, putting less in their pension and are less confident about their financial future. Three in five single women said that living alone has a negative impact on their finances.

Single women have an average of just over £29,000 in their pension, compared to £32,000 on average for all women. Single women have less money saved than single men: just shy of £4,600 for single men vs £3,600 for single women.+

When questioned, single people said they are less likely to feel confident that they will pay off their mortgage by the time they retire: 63% of single women are confident, compared to the average of 75% for married people. And asked about whether their pension will be enough in retirement, just a third of single women are confident they can live comfortably on it compared to 56% of married people.

What can you do?

Ensure you are not undervalued by keeping an eye on your pension statements.

If you feel you are not being treated as fairly as your male counterparts, or even if your household pension contributions are unequal, perhaps it is time for some much needed conversations.

Make sure you are well informed of your pensions, seek financial advice from a professional about how you get the best from them.

Plan for the future. Again, a financial adviser can help you get the best from your pensions, as well as your other financial areas (such as investments etc) to ensure your future financial wellbeing is as positive as possible. And that your financial and life goals can still be met.

We’re here to help

Our role as your Financial Adviser is to understand what you want to achieve, to recommend a suitable financial plan of action to get you there, and to be by your side through every step of the journey.

For more information please call Willow Tree Financial Services on 01323 436680 oremail Rachael@willowtree-fs.co.uk.

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested. Your home may be repossessed if you do not keep up repayments on your mortgage.

Sources: +AJ Bell’s latest Money Matters report June 2023


AJB_Money_Matters_Wobbly_Bits_Report.pdf - pages 4 and 12



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