26 Feb 2024
Headline New – Pension Warning as women need to work an extra 19 years to close the pension gap as pension funds fall short by £136K
You may have seen the headlines in the papers and on the radio. Research by Now Pensions and Pension Policy Institute (PPI) reveals the true extend of the issues women face in retirement.
These headlines come on the same day as the DWP announces a freeze on the earnings threshold for the auto-enrolment earnings trigger at £10,000p.a. for 2024/2025 and the lower earning limit is to remain at £6,240p.a.
Currently women make up roughly 80% of workers that earn less than the automatic enrolment threshold. Some industry leaders are calling for the removal of the threshold for automatic enrolment which could see these women included in pensions automatic enrolment. According to the PPI, if both the earnings threshold and the 22 age requirement were to be removed for automatic enrolment 885,000 young women in employment would become eligible for a workplace pension.
Lauren Wilkinson, a senior policy researcher at the PPI, said: “By their late 50s, women have average pension savings worth less than two-thirds of men’s, with a substantial proportion of this difference stemming from inequalities in the labour market, including differing working patterns and the gender pay gap.”
Moreover, women often outlive men, meaning their retirement savings must stretch further. Yet, due to the gender pay gap, women generally have less saved, leading to increased financial strain in later years.
The gender pay gap has been a persistent issue across industries, regions, and societies worldwide. While significant strides have been made in addressing this gap, its repercussions extend beyond the workplace, affecting long-term financial stability and retirement planning, particularly concerning pensions.
One of the key mechanisms through which the gender pay gap affects pensions is through defined-contribution pension schemes, where contributions are typically based on a percentage of earnings. Lower earnings mean lower contributions, resulting in a smaller pension pot upon retirement. Additionally, breaks in employment or part-time work to care for family members, which women are more likely to experience, further diminish pension savings.
Empowering women to take control of their financial future by accessing financial education is one vital step in closing the pension gap.
Employers can help their female and male employees by providing tools to help their employee forecast their actual pension compared to desired pension in retirement. Ideally showing all their pensions, including their state pension in one place. We know that the government pensions dashboard has been delayed by the government until 2026 and could have limited functionality.
Wingate Benefit Solutions has a unique Pension Engagement tool that can really bring pension provision to life for employees and help them understand the true value of the current and projected pensions. As well as showing employees how to enhance their pension with forecasting tools and direct links to online pension valuations, the system is supported by a team of pension experts who can be contacted via the Pension Engagement tool. A real person will provide assistance to the member through the employee’s preferred method of communication.
Watch a 1.30-minute video to find out more and/or contact us on info@wingatebs.com or phone 01883 332260
Ref Now Pensions PPI The gender pension gap report 2024
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