The Pensions Gap

As part of Fawcett’s work on closing the money gap for women, we are delighted to publish new research exploring women’s attitudes to pensions. Kindly supported by Scottish Widows, this research has examined why women save less in to their pensions than men who earn the same amount as them.

Women save around 40% less into their pensions pots than men [1]. This gap represents the culmination of a life long gender pay gap that most women experience and which is highest for women in their 50s [2], but there is more at play here. Women tend to save less than men right across the income spectrum [3], are less likely to report that they understand pension products than men [4] and 76% of women do not know how much they need to save for a comfortable retirement [5].

Because of their smaller pension pots, women are more reliant on the state pension than men, and the changes in state pension may leave some women worse off. But we also know that these changes will leave us more dependent on private pension provision, which is why women’s tendency to save less into private pensions becomes a key issue.

The qualitative research used interviews and focus group discussion to build insight into women’s decision making processes on pensions and savings; the pressures and trade offs they have to make and the dynamics of decision making in couple households. The findings can be found in our report Closing the Pensions Gap: Understanding Women’s Attitudes to Pensions Saving, and you can read the executive summary with key findings and recommendations here.

The research found that whilst most women interviewed believed they should be financially independent, many had cut their own pensions contributions to cover the costs of childcare, or as a result of taking time out of work to look after children.  Often these women were relying more on their partner for a secure retirement than they realised.

Key Findings

  • The research explored the reasons for these results, and found that often decisions about pensions were informed by traditional ideas about male and female responsibilities
  • Most women interviewed were unaware of the personal financial consequences of the impact of unequal caring responsibilities and the savings decisions they are making
  • Many interviewees sought pensions advice from men (e.g. fathers or partners) or defer to them when it comes to decision-making about pensions. They display a lack of confidence, which is undermining their financial independence and decision-making.  The report suggests that gendered assumptions about maths at school, and the fact that girls and women are put off by a ‘masculine’ financial environment is partly to blame.
  • Student debt and the costs of a family were found to be key barriers to saving for these women. Automatic-enrolment (AE) is a welcome way to simplify starting a pension, but AE payments will not be enough to ensure sufficient income in later life.

Key recommendations:

  • For Industry and Employers: Information should be provided to those embarking on maternity, parental or paternity leave about the risks associated with lower contributions during this period. 
  • For Industry and Employers: Where one partner chooses to stop working to care, the other partner should be encouraged to contribute to the non-working partner’s pension to enable them to build long-term economic security in their own right. 
  • For Government: Government should pay an Auto-Enrolment Credit to those eligible for carer’s credit under the state pension system. It would be equal to the value of employer’s contributions at the auto-enrolment trigger level £10,000. 
  • For Employers, Industry and Government: At the outset of student loan repayments or contributing to a childcare voucher/ tax-free childcare scheme, individuals should be encouraged to default these payments into their pension once the loan is repaid or childcare is no longer needed. 
  • For Industry: Clearer advice and information is essential. Industry must provide concrete scenarios on regular pension statements to help visualise the benefits of increased contributions. 
  • For Industry: Access to pension information with the ease offered by online banking should be available, ideally fully integrated with online banking. 
  • For Government: The confidence of women and girls around maths and long-term financial planning, should be built up. The Fawcett Society recommends that girls with strong GCSE maths results should be defaulted into A-level study with an option to opt out.

Read the recommendations in full in our executive summary.

Read the full report.

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[1] Scottish Widows, Women and Pensions Report 2014

[2] ONS ASHE stats 2014

[3] Scottish Widows, Women and Pensions Report 2014

[4] Hung, Yoong and Brown (2012) Empowering women through financial awareness and education, OECD, Accessed December 2015

[5] Scottish Widows, Women and Pensions Report 2014