Last year, Legal & General[i] highlighted that the difference in pension pot sizes between men and women begins at the start of their careers. The initial gap in pension savings starts at 16% but can double by the time women reach their 40s. In their 50s it could be 51% and by retirement up to 55% smaller than men’s on average.
Among full-time employees the Office for National Statistics[ii] highlights that the gender pay gap in April 2022 was 8.3%, up from 7.7% in April 2021. This has also led to a savings gap with women across the UK saving a third less than men, leaving a disparity of 40% between men and women at the age of retirement.
There is some positive news for women when it comes to the state pension, though. Reforms since 2016 have seen the average amount of new state pension claimed by women now £170.52 compared to just £152.12 for women claiming the basic state pension. Men have lost £2.76 but still get just over £5 more than women a week[iii].
Sarah says, “Women are hit financially from all sides with the impact of earning less than men affecting both savings and pensions. Even the gain on the state pension sees women still getting less overall. Add to the equation the fact that women are more likely to take a career break or work part-time when they have a family, and it’s little wonder many are at a big disadvantage financially by the time they retire.”
Women can often lose out if they get divorced, too, with a significant proportion of women either overlooking or not being aware of the value of a pension.
Around four in ten marriages[iv] end in divorce in the UK but according to a survey earlier last year by Which? members, only 15% of couples include the pension in the joint assets they seek to divide[v].
Sarah recommends employers support their female workers by offering them financial education so that they understand more about how to address these issues.
Sarah says, “Knowledge is power but often women are unaware of the consequences that taking a career break can have on pension savings, or that in a divorce taking account of pensions when splitting up joint assets can make a big difference to future finances.
“On International Women’s Day we urge employers to help women improve their financial health by raising awareness of some of the issues around pensions and savings to help them make better financial decisions.”