Gender pensions gap: Retired women go 4 months a year without a pension

Earlier this month marked ‘gender pensions gap day’ when the average retired woman would effectively stop receiving a pension if it was paid out at the same rate as men, according to the TUC.

Prospect Union has calculated that the income gap between men and women in retirement today is 32.9% – more than double the gender pay gap, and the equivalent of the average retired woman going for the four remaining months of the year without a pension.

The TUC has called on the Pensions Commission – established by the Government to make recommendations on the pension system – to set out a ‘bold plan’ to close this gap.

This should include measures to make workplace pensions work better for people in low paid and part-time jobs, and deliver a State Pension boost for those with unpaid caring responsibilities.

Reasons for the gap

The union body says that the main drivers of the gender pensions income gap are:

Unpaid caring responsibilities: women are much more likely to take time out of paid work or to work part-time due to caring commitments, either bringing up children or looking after older or disabled relatives. One in ten women aged 30-34 are out of paid work because of caring commitments – and women are 18 times more likely than men in this age group to be economically inactive for this reason. Analysis from the Pensions Commission shows the gap in pensions contributions widens significantly when women reach their thirties, and after the birth of their first child.
Gender pay gap: across their working lives, women persistently earn less than men and are more likely to work part-time and therefore accrue lower pension contributions. In particular, women are more likely than men to earn below £10,000 or to work in multiple jobs that pay below this rate – the threshold for employers to have to put workers into a workplace pension.
State pension: historic differences in the state pension have left currently retired women with lower state pensions on average.

Pensions Commission

The Pension Commission was established by the Government last year to make recommendations on the long-term adequacy, fairness and sustainability of the pension system. Its final report is expected early next year.

The TUC says the commission’s interim report – published in May – exposes how women, disabled people, and black and ethnic minority people are at considerably higher risk of not receiving a decent income in retirement.

The report describes a system in which, although participation rates in workplace pensions have doubled due to auto-enrolment, up to 19 million working-age people are not on track for an adequate retirement income.

The TUC says the Pensions Commission provides a much-needed opportunity to close the gender pensions gap and ensure that everyone receives a decent retirement income.

The TUC has highlighted three key solutions for narrowing the gender pensions gap for women retiring in the future:

Reforming the occupational pension system so that people on low pay don’t miss out. This should include phasing out the £10,000 automatic-enrolment earnings threshold that excludes many women from workplace pensions, calculating contributions from the first pound of earnings, and ensuring low paid workers can benefit from employer pension contributions even if they are unable to contribute themselves.
Ensuring the State Pension better recognises the value of unpaid caring and addresses the penalty faced by those who take time out of paid work because of caring responsibilities. This should include a Carer’s Credit to replace lost workplace pension contributions with additional State Pension on top of the flat-rate New State Pension.
Fixing the staffing crises in social care and childcare and ensuring universal, flexible, high-quality childcare is available to all. This will support women to stay in work whilst they balance work and care and address the underlying drivers of the gender pensions gap.

Read more about Age and Gender in the workplace on Empower Up.