Women would need to work 14.5 more years to match men's pension savings

More than 50 years after the Equal Pay Act, women’s average earnings still fall short of men’s — and that leads to a significant difference in retirement income between the two sexes.

The good news is that the gender pay gap is narrowing — in 2020 the difference between the average earnings of men and women was 15.5%, down from 17.4% in 2019.

But according to new research by the Centre for Economics and Business Research (Cebr) and equity release provider more2life, women would need to work an additional 14.5 years for their pension savings to catch up with those of men.

That’s despite the fact that women save more of their earnings into a pension — 9.4% of income vs. 8.3%.

With men anticipating an annual retirement income of £20,712 and women expecting an income of £14,964 in later life, the analysis from Cebr and more2life suggests that when life expectancy is taken into account, the gender pensions gap could be as much as £183,936.

“Although women appear to be better at saving into their pension, they still face a retirement that is less comfortable and financially secure than their male counterparts,” said more2life chief executive Dave Harris. “The stark difference in retirement incomes highlights the need to address the root causes of financial gender inequality and better support women as they make choices around how to use their assets both in the lead up to and during retirement.”

The gender pension gap has increased from £157,263 last year, which is likely due to the pandemic and its impact not only on the value of pension pots but the ability of over-55s to save into their retirement fund.

Women are more likely to work in sectors hardest hit by Covid-19 and therefore more likely to have been made redundant or furloughed.

In the study, 30% of women said their financial situation had worsened since the start of the pandemic, hampering their ability to save money for later life, compared to a quarter of men (24%) who said the same thing.

Dave Harris from more2life described the findings as an “alarming wake-up call” about the gender disparity in retirement.

“It’s clear that the Covid-19 pandemic has caused significant disruption to many people’s retirement savings, but the impact has been most acutely felt among older women,” he said. “As we begin to think about what a post-Covid society looks like, it’s vital that the industry and government does more to encourage women to engage with long-term financial planning.”

Alternative retirement income sources, such as property wealth, could offer some women greater financial stability in later life and help to manage the impact of the retirement gender gap, Harris added.