The average male pensioner in the EU has a pension worth 40% more than the average woman, according to new analysis from employee benefit consultant, Mercer.
For those in work this compares to an average difference in pay of 16%.
Although there were differences between different parts of the EU, Mercer said that half of member states had a pension gender gap of 30% or more. The pension gap for pensioners aged over 65 in the UK was 40%, behind only Luxembourg and Germany.
Commenting on the findings, Mandy Schreuder, diversity and inclusion consultant at Mercer says that employers are key to tackling the crisis. “It’s not only an urgent challenge for governments and policymakers, the pensions gap should be forefront of employers’ minds. Women live longer but with lower levels of savings they face a higher risk of retiring into poverty than their male counterparts.”
She adds: “The gender pay gap may be the hot topic at the moment but few of us consider the impact it has, in combination with career breaks on the financial wellness of women in retirement. Coupled with an ageing Europe workforce this challenge will be highly relevant to companies over the coming years.”
Mercer says that those companies that work to close the gender pensions gap will enjoy the benefits of increased employee engagement and productivity.
Across the EU, most pensions are linked to income, meaning that those workers who earn less, work part time or take time out to care for children or older family members invariably have smaller pensions. While Mercer says that some firms are trying to tackle this, less than 10% have savings or pension schemes to accommodate different working patterns.
‘People need to focus early on what they need to save for retirement’
Eve Read, principal head of proposition at Mercer says: “Most retirement plans are designed for a 40-year long, continuous, full-time career with few breaks and do not reflect womens’ divergent needs.”
This problem is compounded by the fact that women are typically less confident making investment decisions than men. Mercer research shows that women are 62% more likely than men to pick a defensive investment. Although the risk profile of these funds might be lower, they are likely to grow less as a result and may not provide the outcomes women need.
- See our First 50 Funds for beginners for investment ideas
Ms Read adds: “The root causes behind women’s risk aversion and lack of financial confidence are multi-dimensional and complex but action-orientated financial education should be at the heart of the solution. We have found that benefits communication that is based on a women’s individual circumstances is more likely to get her attention and subsequently take positive action.”
Christopher Stiles, a director at law firm, Gowling WLG, says that the research shows that pension saving must be regarded as a greater priority for society as a whole. “If people focus early on what they need to save in order to fund the lifestyle they want when they retire, then that will benefit everyone – women and men. The role of the pensions industry is to promote awareness on issues like this, and to ensure that if people do take an active interest, there is a system which will support their needs.”