Decisive policy action is needed by government to fix the gender pensions crisis, senior industry professionals have stated.
Sean Christian, managing director and executive director of the wealth management division at Canada Life, called the gender pension gap between men and women a serious “inequality” which “can only be addressed through decisive policy action”.
He urged the government to make “relatively simple changes to the way auto enrolment works today, [which] would benefit both men and women but would go a long way towards levelling the playing field.
“Changes such as removing the lower contributions limit would let more people benefit from every pound earned, while removing the £10,000 threshold would make auto enrolment more inclusive and begin to level up pensions for all.”
Dave Harris, chief executive at More2life, said: “It’s clear the Covid-19 pandemic has caused significant disruption to many people’s retirement savings, but the impact has been most acutely felt among older women.
“As we begin to think about what a post-Covid society looks like, it’s vital that the industry and government does more to encourage women to engage with long-term financial planning.”
The stark difference in retirement incomes highlights the need to address the root causes of financial gender inequality.
Harris
Their comments came after two pieces of research carried out by each provider ahead of Pensions Awareness Day today (Wednesday 15) found a stark divide between the genders when it came to retirement outcomes.
The findings from both More2life and Canada Life pointed to a sharp mismatch between how much men and women are likely to receive from their pensions savings, which has created a lack of confidence among women about whether they will be able to achieve their expected retirement outcome.
According to equity release lender More2life, when life expectancy is taken into account, the over-55’s gender pension gap has widened to £183,936 in 2021, an increase of £26,673 (17 per cent) since last year.
This is despite women on average contributing more of their income toward pension pots than men (9.4 per cent compared to 8.3 per cent).
More2Life analysed data from official government sources, collated by the Centre for Economics and Business Research, and from its own poll of more than 1,000 UK adults, carried out by Opinion Matters earlier this year.
The analysis found that women have to work an average of 54.5 years to reach the same level of pension savings that a man can reach in 40 years (14.5 years or 36 per cent longer).
Moreover, Covid-19 has had a significant dent in women’s financial wellness. According to more2life’s analysis, 30 per cent of women reported that their financial situation has worsened since the start of the pandemic, compared with 24 per cent of men who reported the same.
The widest discrepancy in retirement incomes between genders occurs for those who have worked for over 50 years. Of these individuals, men received £19,404 in annual retirement income compared to women on £11,592 – a difference of 40 per cent.
Taking the average earnings of each gender in 2020, men have been able to contribute more to their pension pots than women (£3,184 compared to £2,340 annually).
This underscored the research into retirement confidence, which was carried out by Opinium on behalf of Canada Life and polled more than 4,000 Britons, 1,605 of whom had received regulated financial advice.
This research found a lack of financial wellness and ability to save has created a significant gender divide when it comes to retirement confidence, even among the advised.
Among those adults who had received advice from a professional adviser, nearly two-thirds of men (64 per cent) said they were confident they will retire at the age they plan, compared with 53 per cent of women.
When asked about financial worries, 45 per cent of women said they didn’t feel they would have any financial worries in retirement, in comparison to 58 per cent of men. The Canada Life study also found that men were more likely to think they will completely stop working when they retire, compared to 55 per cent of women.
More2life’s Harris added: “Although women appear to be better at saving into their pension, they still face a retirement that is less comfortable and financially secure than their male counterparts.
“The stark difference in retirement incomes highlights the need to address the root causes of financial gender inequality and better support women as they make choices around how to use their assets both in the lead up to and during retirement.”