Pension gap refers to the difference between the retirement income that people are projected to have based on their current savings and pension contributions and the income they will need to maintain their standard of living in retirement. In other words, it's the shortfall between what people have saved and what they will need to cover their expenses during retirement. 

 

A gender pensions gap is the difference in pension savings between two distinct groups, such as men and women. There is not yet an official definition for ‘pension savings’, some reports use levels of prospective income in retirement. 

 

According to Organisation for Economic Co-operation and Development (OECD) reports in recent years, there is a need for the Government to address the gender gap in retirement saving arrangements since the gender pension gap is gaining wider in some European countries. In 2020, the pension payouts to women over 65 were 25% less than those to males on average. At the same time, the differences are above 40% in Germany, Luxembourg and the Netherlands, while in Denmark, Estonia and the Slovak Republic, the pension gap is lower than 10%. According to Alexandra Miles, reducing the pensions gap between men and women is a work in progress and there’s still a long way to go, with women retiring 50% less than men. According to research from Land & General(L&G), the pension gap exists regardless of industry sector although its size varies between sectors. The six industries with the biggest gaps include the top three industries for female employment: healthcare (59%), pharmaceuticals (46%) and care (45%).

 

One of the reasons for causing the gender pension gap is the gender pay gap. There are several reasons for the gender pay gap, one of them is part-time work. In order to support their families from both home and the workplace, many women would like to return to work after giving birth. According to Office for National Statistics (ONS) reports, 36% of women and 11% of men are working part-time respect after taking time off to care for newborns do so in a part-time capacity. According to a recent Sunday Times article that cites L&G analysis, working part-time has a considerable impact on anticipated pension provisions in retirement. After having two children, taking on two part-time jobs could leave the average woman with a pension of £219,425 at age 65, which is less than a fourth of what a male would receive if he continued working full-time without taking a career break.

 

Besides, unaffordable children is also one of the factors of creating the gender pension gap. According to a recent OECD assessment, the UK has the most costly childcare in the entire world. To encourage more parents to return to the workforce after having children, daycare must be made more accessible and affordable. A trial in Quebec, Canada, that fixed childcare costs at C$10 a day, ‘A Canada-wide Early Learning and Child Care Plan’, has yielded outstanding results, showing an increase of 1.7% in the province’s GDP. 

 

Ideally, everyone should be able to support themselves, but due to the current pension disparity, women are more likely than men to experience poverty in their golden years. According to L&G research, the average pension pool size for people retiring in 2021 was £12,000 for women and £26,000 for males. While no one is saving enough for retirement, women have fewer options because the size of their retirement pots heavily influences their choices. Due to the fact that their pots rarely allow for these options, women are less likely to benefit from protecting themselves against longevity risk by purchasing an annuity or choosing drawdown to maintain investment growth after retirement.

 

To solve this issue, it will be a long-term effort from various parties including regulators, individuals, employers and providers. For example, HR leader can remediate gender pay gaps, pension leader can introduce unisex rates on annuities, women themselves can discuss saving, expenditure and pension arrangements with their partners and ensure they have scope to save for their own pension, and lastly, Government can introduce catch up provisions for pension contributions to fill career gaps. Potential solutions can also be categorized under the ‘three Ps’ which are policies, product and people, with changes to the status quo being required.