Women are set to suffer in retirement, because their employers are putting less money into their pensions. In fact, over the course of their working life, a new study has revealed they will contribute an average of almost £50,000 less to a female employee than to a man. The question is why, and what can be done to stop a generation of women retiring with derisory pensions.
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The study by Zurich UK looked at contributions to 250,000 pension plans. They found that smaller pension contributions were the combination of a killer 'triple effect'.
The impact of the gender pay gap is clear. Even if women received the same percentage of salary as a pension contribution, their lower salaries overall would mean smaller pension contributions.
There's also the impact of women taking career breaks, so there may be years when a woman isn't working, and therefore nobody is making any contribution to her pension. This brings down the overall average contribution.
Between them, these factors could begin to account for the fact that last year, on average, men under the age of 35 received £317 more in employer contributions than women of the same age. However, the study also found that women are simply being offered inferior pensions. Between 2013 and 2016 women received an average of 7% of their salary a year as pension contributions, while men received 7.8%.
The reason for the last variation is less obvious, but it has a number of contributing factors. It's partly because men are more likely to work in management roles, with a superior pension scheme. In fact a study by the Chartered Management Institute last year found that men are 40% more like to be promoted to management roles than women. Directors often have particularly generous pensions, and only one in three directors are women.
It also has something to do with the fact that men typically work in sectors with more generous pension schemes, and women are more likely to work in smaller firms, with less of a commitment to contributions.
Taken together, all these factors mean that over the four year period, men received £3,496 in pension contributions and women just £2,489 - a difference of more than £1,000. The researchers then factored in wage growth to calculate that over their working life this could bring the shortfall to £46,689.
What can be done?
Rose St Louis of Zurich Insurance, commented: "The impact of the gender pay gap on women's pension pots is no secret, but this difference in the contributions that they receive from their employer presents a serious – and growing – problem. The 'triple effect' of smaller salaries, career breaks for women and lower contribution rates needs to be addressed: we can't ignore a £47,000 shortfall. Workplace engagement and guidance has a central role to play in helping women make the most of their saving potential while they are working full time, but it is now crucial that greater focus is placed on ensuring that this gap is not allowed to grow any further."
The figures reveal that employers need to focus on their pension systems, to ensure fairness is built in, and the gap is closed. They also need to pay close attention to their hiring and promotion policies, to ensure that discrimination and prejudice are not holding women back at work.
In the meantime, everyone needs to check their own position, and what kind of retirement income they are on track to receive. Zurich is one of many companies with a number of tools to help you calculate what you will be living off in retirement, and how much you need to save now in order to ensure you can make ends meet in future.