The average amount in a woman’s workplace pension scheme is less than half that of their male colleagues (£53,000 compared to £120,000), according to a new report by Close Brothers Asset Management.
Similarly, research by AJ Bell found the average annual withdrawal made by women using the pension freedoms is less than half those made by men (£4,100 compared to £8,500).
The straightforward reason why women save less into their pension is because they earn less than men. After all, there is still a 9 per cent gender pay gap in the UK.
Last year, the BBC came under fire when it was revealed that two thirds of its highest earners were male. Even Claire Foy, who plays the Queen in the Netflix-drama The Crown, earns less that her co-star Matt Smith, who plays Prince Philip.
Tom Selby, senior analyst at AJ Bell, comments: ‘While the disparity in salary and bonus levels between men and women is slowly beginning to get the coverage and political attention it deserves, the retirement apartheid between the sexes remains comparatively ignored. There is no doubt that, when it comes to pensions, women have long been second-class citizens in the UK.’
He continues: ‘Over the longer-term, as the gender wage gap closes, automatic enrolment contributions rise and the single-tier state pension is eased in, the chasm between the pension outcomes of men and women should close.’
However, it is unlikely that the gender pay gap – and its consequence, the gender pension gap – will close without specific legislative intervention.
A new law requires companies with over 250 employees to publish data on their gender pay gap by April 2018. Some have pointed out that women earn the same as men in a like-for-like comparison. The consultancy Korn Ferry, for example, found that the gap is only as low as 1 per cent for men and women on the same level and in the same profession.
But the problem is that women as a population still end up in lower-paying positions because they are much more likely to take time off work to rear children and care for their parents. Therefore, the gender retirement and pay gap come down to the gap in parental leave and care responsibilities and policies.
While shared parental leave was introduced in the UK in 2015 to encourage fathers to spend time with their offspring, it was only taken up by 2 per cent of families, according to the Department for Business.
Today, a select committee urged the government to radically reform parental leave to encourage more fathers to take time off work, or else, it said, the country will never get to grips with the gender pay gap.
Fathers should get the option of 12 weeks’ paid, ‘use it or lose it’ paternity leave. The government should also legislate to force businesses to offer men flexible patterns such as part-time work or unusual hours, the committee said.
Therefore, the way to close the retirement gap is by closing the pay gap, and that requires a shift in the UK’s childcare policy and culture.
Originally published in Money Observer on 20 March 2018: http://www.moneyobserver.com/our-analysis/why-women-have-less-half-pension-their-male-colleagues