Bridging The Gender Pension Gap
Statistical evidence shows a marked difference in engagement between men and women around pensions and retirement planning. It also demonstrates that women have average lower pension pots and will live around two years longer than men. How can we encourage more women to engage with pensions planning? By Helen Hollister
Looking at a sample of 25,000 plans built by our users last year in this link, the split is hugely skewed – 82% male, 18% female.
We help people build plans for saving and retirement. These plans help our users know how much to save up and how much to take from their pensions each year, alongside everything else they may have, to provide the retirement income they want, without running out of money.
We try to attract both men and women equally. However, despite this, we see markedly more visitors who are men. Cost is not an influencing factor as there is no charge.
When it comes to engagement, Caroline Hopper from the communications specialists Quietroom provided some great thoughts and insight below on how this may be improved.
“There’s a clear need to better engage women with their pensions. But how? Aside from fixing the many societal structures and biases that disadvantage women financially in the first place, we can reframe pensions.
Research shows many women don’t feel confident enough to make decisions about their investments or pensions – so let’s change that. We can use inclusive, positive messaging that guides people through what they need to do, and shows that ‘people like you’ do this. That’s proven to make people more likely to engage.
We also need to go to the places and channels where the women we want to reach are already active. It might mean going to Facebook or Mumsnet, taking those positive messages and conversations to where these people are already engaged”
As an industry we need to do better in engaging females, not least because there are also a number of other issues which statistically are likely to apply more to females, as we discuss below.
Why should females become engaged?
Our site statistics also show that the average pension pots entered on our systems by females are 40% less than the pots entered by males.
Like the “earnings gap” which can exist in employment between the sexes, there can also be a “pensions gap” in retirement.
This gap should not exist, but unfortunately, it does. Women are on average, likely to have significantly less savings than men to put towards retirement. This is further supported by research from Insuring Women’s Futures – a great programme set up by the Chartered Insurance Institute and considered by PensionBee’s research into how to close the gender pension gap.
In addition to the above, and to compound matters, on average, women will live around two years longer than men, making them likely to need more savings.
Finally, there are a number of ways that both sexes can lose valuable State and other pension benefits, but statistically, this applies more to women. It can be very easy to lose these benefits without realising it until it is too late or costly to resolve.
Reduced workplace pensions
For both men and women, taking a career break or reducing hours through part-time work will have an immediate effect on pension savings built up in the workplace. You may not be accruing benefits or saving into a pension pot if you take a career break. You will also likely be saving less if you return to work part-time.
In a study by the Office for National Statistics, which defines couple families as either married, civil partnered or cohabiting adults with dependent children, researchers considered the split where one partner worked full time and one part-time.
This showed that in 44.1% of couples, a man worked full-time and their partner was employed part-time. In 3.0% of couples, a woman worked full-time and their partner part-time. This may change over time, but currently, it is statistically much more likely that a woman will be working part-time within a couple than a man, if one does work full-time and one part-time.
It is relatively easy to understand that if you work part-time, you will build up lower pension benefits, but what is not clear to many is the effect these periods can also have on your State Pension.
Reduced State Pensions
The full State Pension is very valuable and, for both sexes, can make up a large proportion of retirement income.
The full State Pension is paid if you have accumulated 35 years of National Insurance (NI) contributions. If you have less than 35 years, it is prorated. If you have less than 10, you get no State Pension at all.
Most people pay NI contributions through work. Given this, most people think of the 35 years in terms of time that they are working. If you leave the workforce for good or for a period of time, you will therefore not be paying NI contributions through work.
If you are claiming child benefit, this is not an issue, as by claiming child benefit, you also get an NI credit for the year. However, if your partner earned over the limit, child benefit is lost. This can be addressed by either paying back the child benefit or deregistering, i.e. opting out of receiving it in the first place.
HMRC child benefit administrative data shows that by August 2021, a total of 651,000 families had opted out of claiming child benefits. Within the families that opt out, 85% of those who were receiving the Child Benefit payments were registered as a female claimant and 15% were registered as a male claimant.
This means that in cases where the NI credit is lost due to opting out, it is overwhelmingly females that may be affecting their State Pension entitlement.
If a parent is not working or undertaking part-time work, which is below the threshold for full National Insurance contributions, currently £12,570 per year, then it is far better to claim the child benefit and pay it back. Yes, it can be more hassle to pay it back, but this is insignificant compared to the potential benefit lost.
Another factor to consider is that the child benefit NI contribution is only made if claiming for a child under 12. Once the child is over this age, the NI contribution is no longer made automatically. Very few people are aware of this.
If your child (or all children) are over 12 then you need to be working or be eligible for other types of benefits to gain the NI credit. You can see the full list of eligible benefits here, eligibility for any of which needs careful consideration if you are not working.
In short, do not lose valuable NI contributions if it is possible to keep them. You can check and review your previous history of NI contributions here.
There appears to be a clear gap in both engagement and savings between males and females in retirement planning.
This must be better addressed by the pensions and saving industry to help with engagement and encouraging more female retirement saving where possible.
Secondly, there are a number of potential pitfalls around the State Pension, which, whilst applying to everyone, are statistically more likely to harm the future entitlements of females rather than males. These issues require a clear communication strategy from policymakers to address this, as it appears they are not widely known.
Our tools and further guidance on not missing out on the State Pension, and those of many other entities and government organisations such as MoneyHelper are available to all for free.
We encourage more females to use them, even if they are many years from retirement. We, and I am sure others, hope and aim to encourage a higher percentage of women to use and benefit from them in future to improve their retirement outcomes.
Authored by Helen Hollister improves user experience at Guiide and is a working mum of two children.
Guiide’s consumer site is the product of over 25 years of experience in the pensions market, alongside a feel for understanding how non industry people view pensions. The result is a popular free retirement planner that helps around 10,000 users a month create a unique and individual plan and avoid running out of money during retirement, overpaying charges or tax. Guiide does not wish to replace advice, but aims to be the “next best” option for the non-advised mass market.