The coronavirus will have a disproportionate impact on women's pensions

15 April 2020

Analysis by PensionBee shows that the gender pension gap widens with age

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Over the past few years the gender pay gap has finally been getting the column inches it deserves. And by 4 April all companies with more than 250 employees were expected to disclose their gender pay gaps for the third year running.

However, due to the ongoing global coronavirus pandemic, the Government Equalities Office (GEO) and the Equality and Human Rights Commission (EHRC) last week took the surprising decision to suspend enforcement of the gender pay gap deadlines, no longer compelling employers to report their data for 2019/2020.

Before the announcement some 3,000 employers had already reported, with few surprises – after all women have systematically been paid less than their male colleagues, regardless of sector or level of seniority, for decades. 

In the last few weeks things that used to weigh heavy on our collective consciousness suddenly don’t seem so important – chief among them Brexit. However it’s precisely at times like these, when newspaper column inches and our attentions are diverted to more pressing matters, that as a society we don’t lose sight of our ideals nor allow our leaders to give businesses carte blanche to continue discriminating against women. Especially now, when it’s predominantly women who are on the frontlines of the battleground, fighting against coronavirus. 

Last year the NHS confirmed that 77% of its workforce are women, however just 46% of the most senior manager roles are held by women. A 2019 review of gender pay in the public sector found that male doctors working in the NHS earn an average of 17%more than their female colleagues. The greatest disparity is evident amongst GPs, with female GPs earning, on average, a third less than their male counterparts, equating to a difference of around £38,000.

More broadly, the statistics are equally bleak. 2019 figures from the Office for National Statistics (ONS) show that the gender pay gap (for median earnings) for full-time employees is at 8.9%, up 0.3% on 2018, and down by a microscopic 0.6% since 2012.

One could therefore argue that the gender pay gap is more relevant today than it ever has been, and women can’t afford for us to be complacent. Inequality in pay doesn’t just affect women in the here and now, it also has serious implications for their futures. Unfortunately, when women are paid less in their working lives, they will be paid less in retirement too. 

The gender pension gap explained

Numerous studies have found that women who are paid less save less, resulting in much smaller pension pots by retirement. Each year PensionBee conducts a Pension Landscape survey looking at how British pension pots differ depending on region, age and, crucially, gender.

Based on a sample of 13,500 consumers, the online pension provider found that a gender pension gap exists in every UK region,  with the widest gap of 54% in Northern Ireland. On average, British men have saved £23,423 towards their retirement compared to just £15,066 saved by women, accounting for a 36% gap in the size of their respective pension pots. 

Institute for Fiscal Studies (IFS) research shows that the arrival of children accounts for a gradual widening of the gender pay gap with age, with a difference of around 10% evident just before the arrival of the first child.

ONS data puts the average age at which a woman has her first child at 28.8, and as women are still much more likely to stay at home with the children than men, this could explain why we’re seeing detrimental effects on women’s pension pots from the outset.

PensionBee’s analysis found that the gender pension gap continues to widen with age. It reported a 32% gap between male and female savers in their forties, and a 51% gap amongst savers aged fifty and over. The findings indicate that as a woman moves closer to retirement she will have significantly less savings than her male counterpart and may face a less certain financial future.

A woman in her fifties will have significantly less time to reduce the gender pension gap than a woman in a younger age bracket and, as a result, may have to work longer than anticipated or may become reliant on the State Pension, which pays just £8,767.20 a year, to make up for the shortfall. 

When women take time out of employment to raise children (or care for elderly relatives), their pensions suffer. And when women return to work, we know that they make up three quarters of the part-time workforce in the UK, so the combination of lower salaries and long career gaps, with little or no pension saving for years, are a massive disadvantage.

Coronavirus stands to have a disproportionate impact on women in the labour market, due to the high number of women working in the retail and hospitality sectors. It’s likely their incomes will suffer in the short-term, with long-term consequences for their pensions.  

To avoid a shortfall in later life women who are facing financial uncertainty, during this crisis and beyond, must be encouraged to continue contributing to their pensions no matter what. The benefits of compound interest and tax tops from HMRC make a pension an attractive long-term investment. An online pension provider can help you make contributions to your pension in a few clicks, with some allowing you to save any amount for maximum flexibility. 

It’s more important than ever that we continue to pressure both government and business leaders to introduce stricter measures to address the gender pay gap, and don’t lose momentum at this critical time for female workers. Gender equality is essential for economies and communities to thrive, and the message is clear: the UK’s hardworking women don’t deserve to be forgotten.

Romi Savova is CEO of online pension provider PensionBee.