Fair Pensions for Women

Hugh Nolan

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Following International Women’s Day recently, I wondered how fair pensions are to women these days. A survey by the Society of Pension Professionals (SPP) in 2017 found that 49% of us thought that pensions were fair for women, compared to 61% who thought the same for men. Only 7% strongly disagreed that pensions were fair for women. I’m one of the 7%.

Women now have equal Normal Retirement Ages to men and can expect to live longer than men, drawing their State and any other Defined Benefit (DB) pensions for longer. The recent investigations into GMP equalisation has highlighted that it’s very hard to predict whether men or women are better off because of the remaining inequality, with the average difference being less than 1%. I can understand why people might imagine that pensions are fair between men and women. They’re still wrong though!

The main reason why pensions aren’t fair is that pay before retirement isn’t fair to start with. In 2012, the median earnings for women working full-time was £23,100 pa, some way below the equivalent figure of £28,700 pa for men. When gender pay gap reporting was introduced in 2017, 90% of women covered by the survey were working for employers who paid them less than men and in most sectors, the gap was over 10%. This might be improving slightly as early indications from the 2018 reporting suggested that 50% of companies narrowed the gap over that year, although 40% widened it.

The Office of National Statistics (ONS) says that women are paid 17.9% less per hour than men on average. It’s even worse in Germany (21%) and the US (22%). In Finland, women retiring in 2017 got pensions 27% lower than men, even though twice as many women as men got a top up national pension for those with low/no private pension savings. A DWP survey in 2016/17 found that female retirees in the UK got 40% less than men, leaving them about £7,000 pa worse off.

So it’s clearly not just the gender pay gap that is feeding through to unfair pensions for women. Women are predominantly relied on for child care with fewer than 30% of men taking more than 2 weeks parental leave, three times as many women working part time as men (5.9m compared to 2.1m in 2013) and women also typically retiring two years earlier, often because they can’t continue in their jobs rather than out of choice. On top of that, 1 in 5 women aged 45 to 59 is a carer for someone else. There are 2,700,000 working women who earn less than the £10,000 pa needed to qualify for auto-enrolment. You probably won’t be surprised to hear that more women choose caring occupations rather than those that are most lucrative.

Research from Aegon suggest that these factors combine to leave women with average pension savings of £56,000 by age 50, exactly half of the corresponding figure for men. 15% of women don’t pay into any pension scheme at all (11% for men) and only 4% of women have £300,000 or more in pension savings, compared to 15% of men. According to an Aon survey in 2018, more women than men contribute less than 5% of their pay to pensions (30% vs 40%) and more women than men worry about running out of money after retiring (64% vs 50%). 1 in 3 women admit they are unsure of their exact pension savings and only 1 in 5 men say the same, though personally I suspect that might be largely due to bravado.

As if all that wasn’t bad enough, the advantage that women have been able to draw their State Pension earlier than men has also been taken away from them. The Pensions Act 1995 set a timetable to equalise State Pension Age but the austerity agenda led to an acceleration in 2011 with 2.6 million women having their retirement plans thrown into confusion. 873 of these women are known to have self-harmed due to the stress and hardship of these reforms and 70 say they have been so badly affected that they attempted suicide.

Does that sound fair to you?

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