12/02/18The gender pay gap: even pensions are not immune
By the age of 50, men’s pension pots are double the size of women’s, according to research from Aegon.
- The gender pay gap
- Differences in working hours
- Family responsibilities
What is the gender pay gap?
According to the Government Equalities Office: “The gender pay gap is an equality measure that shows the difference in average earnings between women and men.” (Source: gov.uk)
The past three months have seen huge progress made in terms of equal pay and the gender gap. In December, the Equality and Human Rights Commission declared that all companies must disclose the difference in pay between male and female employees, alongside limitless fines for non-compliance.
January has seen large media focus on the 500 large UK companies shown to have a significant difference between male and female staff wages.
The Government Equalities Office reports that the gender pay gap is now at its lowest level since records began; 18%.
What causes the difference in lifetime income?
The opinions on this topic are hotly debated and vary widely from group to group. However, there are three factors which may affect the average lifetime earnings of women:
1. Industry and sector:
There are less female employees in high-paying industries.
Research has shown that certain industries pay proportionately higher than others. A great example of this is STEM industries (science, technology, engineering and mathematics). In 2016, a worldwide study showed that entry level positions in this sector pay, on average 20% more than other fields. (Source: Korn Ferry)
Further research has shown that, despite 13,000 women entering the STEM sector, the overall percentage of women working in these industries has fallen from 22% to 21%. (Source: WISE Campaign)
2. Time spent in work:
Throughout life, there are events which force women to stop working, or reduce their working hours, including pregnancy, childcare and caring for relatives or loved ones. This means that, over a lifetime, men are likely to have more working hours in total, than women.
In September 2017, women made up almost three quarters (73.55%) of the part-time workforce, whilst men accounted for 63% of all full-time employees. (Source: ONS)
In addition to this, men who work full-time are likely to work longer days. According to Statista, in the year to June 2017, men worked for an average of five hours more than women each week.
Research from the Chartered Management Institute last year, showed that 66% of junior management positions are filled by women. Comparatively, senior management positions are more likely to be filled by men, with 74% of current positions held by males.
The same study found that, for women who are employed at a senior management level, pay is still disproportionate, with:
- Male directors paid an average of £175,673
- Female directors paid an average of £141,529
In addition, annual bonuses have shown a gender gap of 83%. Male CEOs receive an average annual bonus of £89,230, whilst females in similar positions receive just £14,945, on average.
How does that affect pensions?
People who earn more money can afford to put more aside for the future, it’s that simple.
Given that employees are only automatically enrolled into a workplace pension, if their annual earnings reach £10,000 or above, it is likely that many part-time employees are not eligible. That means that many women, who have reduced their working hours may be left unable to save for retirement.
In 2015, government research showed that just two fifths of those who were eligible for automatic enrolment were female. (Source: Gov.uk)
The problem is further compounded by the fact that employer and often employee contributions are based on a percentage of earnings and the larger the contribution, the greater the level of tax relief.
What can you do?
There are many things you can do to improve your retirement income.
The only thing you shouldn’t do, is nothing.
Of course, you can rely on the State Pension as a base income, if you have accrued enough credits to receive it. But it is unlikely that it will be enough to pay your living costs, any care needs you have and allow you to enjoy having more time to yourself.
To boost your pension savings, you can:
Ask to be included in your employer’s workplace pension. Even if you fall below the earnings threshold, you can ask to be included in the scheme. The minimum contribution rates are due to rise in April, so be aware of how much you will lose in monthly income by doing so.
Start saving. Choose a vehicle which works for you, whether a savings account or pension, and start putting money away.
Seek independent advice. Research has shown that people who seek professional advice could save up to £98 each month toward their pension, giving themselves an additional £3,654 in retirement income each year.
Looking to make sure that you get an equal pension fund in later life? Contact us for more help and advice.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.