Tax treatment depends on your circumstances and is subject to change
Imagine this: two individuals, let’s call them Pat and Chris, work the same job, for the same number of years, under the same gruelling boss. Yet, when the golden years of retirement roll around, Pat’s pension pot is brimming, ready for a life of leisure, while Chris’s is… let’s just say, not quite as pot-bellied. And here’s the twist – Chris is a woman. Welcome to the not-so-funny reality of the pension gender gap.
The pension gender gap is like that one joke that’s been going on for far too long – except it’s not funny. It’s the financial equivalent of being handed a Monopoly game where all the properties are already owned, and you’re just passing Go, collecting a measly £200, hoping it’ll be enough for retirement. Spoiler: it’s usually not.
Women, through the maze of lower wages, career breaks for caregiving, and part-time work (often without the pension perks), find themselves playing a game where the odds are stacked against them.
The case of the vanishing earnings: imagine a world where two equally talented individuals embark on similar career paths, but there’s a twist – one consistently earns less than the other. This isn’t the plot of a dystopian novel; it’s the reality for many women. Factors like the stubborn gender pay gap, jobs that are pigeonholed as ‘men’s’ or ‘women’s’ work, and fewer chances to climb the corporate ladder mean women often see their earnings, and consequently their pension pots, shrink in comparison to their male counterparts.
The caregiver’s pause: picture a race where some runners periodically hit pause, not because they want to, but because someone needs to take care of the home front. Women frequently find themselves pressing this pause button, stepping away from their careers to look after children or elderly relatives. These noble yet unpaid pauses can lead to a significant dip in their pension savings, making the race towards a comfortable retirement all the more challenging.
The part-time puzzle: many women who return to work can only work part-time because they are balancing their job with being a caregiver. These positions might offer the flexibility women need, but they come with a catch – lower wages and benefits. It’s like being handed a smaller shield in a battle, leaving them more exposed to the financial arrows that come with retirement.
Each of these clues doesn’t just tell a story of individual choices but highlights a broader narrative of structural inequalities. Unravelling this mystery isn’t just about finding who’s to blame but understanding how we can rewrite the ending to this story, ensuring a future where retirement savings are no longer a privilege but a right equally accessible to all.
Numbers don’t lie, but they do paint a rather grim picture. The biggest difference occurs in private pensions, with data from Prospect suggesting that the gender pension gap for 2020-2021 was 40.5%. This means that, generally, men are living more comfortably in retirement than women.
Prospect also report that in 2021, the gender pension gap was more than twice the size of the gender pay gap. This begs the question, what can we do about this?
Bridging this gap is a serious call to action for policymakers, employers, and individuals alike. We need a mix of policy reforms, workplace initiatives, and personal financial strategies that don’t just patch the gap but completely close it.
For the policy makers: It’s time for pension credits and equal pay initiatives
Imagine a world where caregiving doesn’t penalise your pension and where your pay slip reflects your worth, not your gender. It’s not just a dream; it’s a policy reform waiting to happen.
For employers: pension equality initiatives and support for returnees
As an employer, you are setting the standard. It is up to you to make sure that you are offering a fair, inclusive payment and pension system to all of your employees. Especially those who are returning after some time away.
For individuals: financial education and maximising contributions
If you are aware that you are earning less than your male counterpart then you may be in a position to negotiate a higher salary. The more you earn, the more you are able to contribute into your workplace pension. A higher salary means that your workplace will contribute more to your workplace pension, as their contribution is a percentage of your salary. Also, having a higher salary gives you better financial means to consider contributing into a private pension. Of course, negotiating a higher salary isn’t always possible, but if you see an opportunity to do so, you should always take it.
As we mark another International Women’s Day, let’s commit to making the pension gender gap a thing of the past. It’s time for a future where financial security in retirement is a reality for both men and women – no jokes, no gaps, just equality.
We can help you to make the best possible decisions when it comes to your pension.
Taking pension money early is not right for everyone as it will leave you worse off in retirement. Also, tax treatment depends on your circumstances and is subject to change. That’s why it makes sense to get help from a regulated specialist.
