There has been much discussion surrounding the gender pay gap, but a number of reports have recently highlighted an equally worrying disparity between men and women’s pensions. And the figures make for grim reading.

Women in their 60s have an average of £51,100 in their private pension pots compared to £156,500 for men, according to data from retirement research body the Pensions Policy Institute (PPI).

Even more concerning is that the PPI also found 1.2 million women approaching the age of retirement have no private pensions at all – 50% more than men of the same age.

There are a number of factors at play that contribute towards the gender pension gap, and within these the ongoing issue with equal pay cannot be overlooked. For instance, female graduates have 30% less workplace pension and will be around £5,000 a year worse off in retirement than their male counterparts, according to the Human Capital Estimates Report from the Office of National Statistics.

These pension figures show a strong correlation with earnings. The average male graduate will earn £1,116,000 across his lifetime, whereas a woman with the same degree will earn £803,000.

Across all workers – not just graduates – both sexes tend to be paid similar rates in their 20s and early 30s, but the gap gradually widens and is at its highest at the age of 48. This is partly due to women taking time away for caring responsibilities; a factor that impacts their pension savings in many ways.

Maternity leave, taking time off to raise a family and returning to reduced hours or part-time work can significantly reduce women’s pension pots. New research by Now: Pensions found that taking such time away from work contributes to 47% of the difference in women’s pension savings, while the gender pay gap accounts for 28%.

Research by Which? found that the average working woman who took time off for childcare duties saved around £68,000 towards retirement compared to £83,000 for full-time working women.

In addition, divorce can significantly affect a woman’s retirement, with the PPI research indicating that divorced women’s savings average just £26,100 compared with £103,500 for divorced men.

With women living longer on average, and therefore needing to save more to live comfortably throughout their retirement, the gender pension gap is a worrying issue.

The introduction of auto-enrolment has gone some way in encouraging those who may previously have failed to plan for their retirement to save into a pension. Yet, the earnings trigger can prevent some women, who may earn less or are able to work less hours due to childcare, from benefitting. Even for those who do meet the required £10,000 salary, the above factors mean they are often contributing less than their male counterparts.

Now: Pensions, alongside the PPI, have campaigned for the government to introduce a “family care top-up” enabling staff on maternity leave to receive pension contributions in line with a pensionable salary, basing employee contributions upon the national living wage. They also suggest top-ups when an employee takes leave or reduces their hours to take on caring responsibilities.

In addition, the two organisations have proposed an increase to the minimum contributions under auto-enrolment to 12% overall from 2025, a removal of the lower band earnings on auto-enrolment contributions, and an increase to the flat rate of tax relief from 20% to 30%.

But it is not just down to the government to close the gender pension gap.

What can employers do?

Communication is key – as seen with the recent High Court case in which a group of women argued that the adjustments made to the state pension age left women in their 50s without adequate retirement plans. The increase, from the age of 60 to 66, to align with the state pension age for men, was poorly communicated and the nearly 4 million women affected were not offered comprehensive advice on how to bridge the shortfall.

Opening up discussions about financial planning and the difficulties employees may face due to individual situations is the first step. Tailoring communication to target the needs of different earning brackets, ages, and genders is much more useful in this instance than a one-size-fits-all approach.

Businesses should speak to employees about plans for their future and how they might affect their pension contributions and eventual pension pot. There may be steps they can take now towards bridging any potential gaps, such as saving more earlier to offset a dip in savings later on. In this instance, the early contributions could also grow more than later ones due to compound interest.

It is important to ensure that these conversations are tailored to the individual needs of lower earners or those planning to take time out to care for their family. Arming employees with the knowledge about how parental leave and/or reducing working hours can affect their pensions is key.

It is also crucial to ensure women are represented at a senior, decision-making level and on boards where discussions about employee benefits and welfare are taking place.

Financial wellbeing

An employee benefit that is often overlooked is financial wellbeing. It is the fastest-growing benefit in the UK today and can help to significantly reduce stress and instil confidence for workers who may be concerned about personal finance issues, including pensions.

At Vintage Corporate we can work with you to design a bespoke financial wellbeing package for your workforce. The aim is to provide employees with the skills and knowledge they need to effectively manage their personal finances, give them more control over their money, better prepare them for managing company resources, and help them to project how much income they will need at key stages of their lives, such as starting a family or retirement.

Financial wellbeing covers all employee benefits received at work, such as pensions, salary sacrifice schemes and insurance products, as well as issues beyond the workplace, including how to get on the housing ladder or deal with debt.

Flexible benefits

Tailoring benefits packages to individual needs and providing the option to opt in and out of certain additions can be highly beneficial to both employees and businesses, and can help to offset some of the issues arising from the gender pensions gap.

It is important to offer flexible options and ensure employees fully understand the benefits available. Businesses need to asses where it may be possible to adapt employee benefits to support women in the workplace. For instance, it may be feasible to introduce a carer’s allowance, offer the option to opt in to the company pension scheme for workers earning below the £10,000 threshold, or to enable spouses/partners and employers to pay into contract-based pensions during career breaks. Affordable or free childcare, care credits, and improved widow’s pensions can also be highly beneficial.

For more information on the steps your business can take to close the gender pension gap and further support women in the workplace, contact our team at Vintage Corporate today.