There is a retirement income gender gap in the UK – here’s what needs to happen for it to close
Women who retire this year will have £4,900 a year less, on average, than men at retirement, according to new research from Prudential. The average annual retirement income for women is £16,900, while men can count on £21,800.
Pensioner incomes are now higher than working people’s incomes according to some estimates, but one in six women still retire on less than what the Joseph Rowntree Foundation defined as the minimum income for an acceptable standard of living (at least £9,998).
Kirsty Anderson, a retirement income expert at Prudential, says: ‘It is really encouraging to see that the retirement income gender pay gap is shrinking over consecutive years and women are starting to close the gap on men.’
She adds: ‘It can be difficult to justify any extra expense when taking a career break, but it is extremely important for anyone taking time out of work to maintain their pension contributions. Saving as much as possible as early as possible is the best way to secure a good quality of life in retirement.’
But saving is difficult for those with lower disposable income. After all, the straightforward reason why women save less into their pension is because they earn less. Even comparing only full-time workers, there was a 9.1 per cent pay gap between men’s and women’s earnings in 2017, according to the Office for National Statistics.
However, the problem is exacerbated by the fact that women still end up in lower-paying positions because they are much more likely to take time out of work to rear children or care for their parents. They are also more than three times as likely to take part-time jobs, according to a recent research report by the Chartered Institute of Insurers.
Taking account of the differences in working habits between the sexes, the gender pay gap stands at 18.4 per cent as of April 2017.
The disparity in salary and bonus levels between men and women is beginning to get the political attention it deserves, as companies with over 250 employees had to report their gender pay gap earlier this year.
Closing the gender pay gap makes financial sense. Research from the accountancy firm PwC has shown that in the UK, economic gender parity could add £188 billion to GDP.
However, the gender pay gap – and its consequence, the gender pension gap – won’t close without specific legislative intervention.
It’s the lack of family-friendly policies at companies that brings about gender disparity. The current ‘pale, male, stale’ executive level needs better incentives to make full use of parental leave and flexible hours, while giving up on the culture of ‘presenteeism’.
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, as it can still be financially more sensible for women to take the time off.
A select committee has previously urged the government to radically reform parental leave to encourage more fathers to take time off work, or else, it says, 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 could legislate to incentivise businesses to offer parents flexible patterns such as part-time work or unusual hours, the committee said.
Only if the perceptions and incentives around family-friendly policies and care responsibilities change will the gender pay gap close.