The full extent of the pension gender gap revealed

28th February 2024 by RetireEasy

A new report has laid bare the gap in pension pot sizes between men and women at retirement – and how many more years women would need to work to make up the shortfall.

New research from the Now Pensions and the Pensions Policy Institute (PPI) shows that, on average, UK women need to work an extra 19 years in order to retire with same pension pot as men.

The research also shows that by the time women reach retirement age (67), they will have average pension savings of just £69,000, or £136,000 less in pension savings than the average man, who will have saved £205,000 in the same period.

This leaves an almost impossible gap to bridge: automatic enrolment starts at 22, so girls would either have to start saving at age three in order to keep pace with their male counterparts, or delay retirement for 19 years – taking them well into their ‘80s.

The report cites childcare and career gaps as playing a key role in this disparity, with women on average spending 10 years away raising a family or taking on other caring responsibilities, adding up to an average of £39,000 in lost pension savings.

The situation also threatens to get worse in years ahead as the spiralling cost of childcare is preventing many women from returning to work: the average cost of full-time nursery for a child under age two in 2023 is £14,800 a year, rising to more than £20,000 in London.

How do the sums add up?

Women with small pension pots also face a double whammy: not only are they retiring with less, but they are also expected to make those funds last longer as they live four years longer than men on average.

As a result of all these inequalities, it’s not surprising that two thirds of pensioners currently living in poverty are women, with single women making up half of this number.

The report is calling for measures to address the imbalances, including the removal of the £10,000 auto enrolment earnings trigger and the lower earnings limit: women make up 79 per cent of workers who earn less than the automatic enrolment earnings threshold, with around 1.9 million women in employment not currently automatically enrolled into a pension.

Commenting on the findings, Now Pensions director of policy and public affairs, Lizzy Holliday, said: “The scale of the gender pensions gap remains vast and will require bolder policy actions. Some of the solutions are broader than traditional pension policy.

“Childcare and gender pay gap issues must be given the urgent attention they require. But setting out the roadmap for the future of auto enrolment including tackling the difficult issue of adequacy in retirement – which affects women disproportionately given lower pension wealth – should be front and centre of next steps.”

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