UK women have smaller pension pots than men at every stage of their career, with the gap widening to a staggering 56% at retirement, new research has uncovered.
After analysing data from approximately four million of its pension scheme members, Legal & General (L&G) found that the gender pension gap remains largely unchanged at 17% while workers are in their twenties and thirties.
However, this gap doubles to 34% while in their forties, before increasing to 51% in the fifties age bracket, and then widening to 56% in retirement.
After looking at the pension pots of more than 37,000 people who retired in 2020, the researchers found that the average size for men was £21,000, compared to £10,000 for women – a difference of more than half.
Rita Butler-Jones, co-head of DC at Legal & General Investment Management, said that the decision to take a career break to raise a family has a clear impact, but that there a number of other factors at play.
These include lower pay relative to male peers at all stages of a woman’s career, and a lack of pension contributions when away from the workplace.
“Women are also more likely to face financial struggles following a divorce from their partner, and are significantly more likely to waive their rights to a partner’s pension as part of their divorce. This is particularly true for older women, with one in four divorces occurring after the age of 50.
“Much like the gender pay gap in wages, the gender pension gap is fast becoming an issue which needs to be higher on our radars as an industry.”
The analysis also reveals that the difference in size of pots has a significant influence on the choices being made at retirement, with 92% of women choosing to take their pension in cash, compared to 86% of men. Only 7% of women consider a drawdown, compared to 12% of men.
Even in industries where women are more heavily represented in the workforce, the pension gap remains just as stark.
For example, in the senior care sector, the research shows that 85% of pension scheme members are women, yet their average pot size is 47% smaller than the average man’s.
Stuart Murphy, co-head of DC at Legal & General Investment Management, said that changing social and workplace attitudes brought on by events over the last year should help level the playing field in terms of responsibilities, helped by increasing acceptance of more flexible working patterns.
“The gender pay and pension gap is a complex issue that will take time to solve,” he continued.
“We need to see increased support from the state and employers in levelling the playing field by looking at issues such as lowering the eligibility age and raising the minimum contributions for auto-enrolment, as well as addressing the pay gap for part-time employees.”
Image credit: iStock
Author; Chris Seekings