The gender pension crisis women can’t afford to ignore
Welcome to #273 weekly newsletter from The Purse.
The gender pension gap is a pressing issue affecting women across the globe, with disparities evident in the UK, Europe, and the US.
In the UK, recent analysis by interactive investor (ii) reveals that women aged 55 to 64 have, on average, £89,000 less in pension savings than men—a 46% gap that has nearly doubled since 2016.
Even among younger women aged 25 to 34, a 45% gap has emerged.
A global perspective
This issue is not confined to the UK.
In the European Union, women over 65 receive pensions that are, on average, 29% lower than those of men. The disparity varies widely across member states, with Luxembourg experiencing a 44% gap, while Estonia's gap is as low as 2%.
In the United States, the gender pension gap is also significant, with women receiving approximately 80% of the retirement income that men receive, highlighting a persistent inequality in retirement security.
Contributing factors
Several factors contribute to this disparity:
Earnings discrepancy: The gender pay gap persists, leading to lower lifetime earnings and, consequently, reduced pension contributions for women.
Career interruptions: Women are more likely to take career breaks for childcare or caregiving, impacting their pension accumulation.
Part-time employment: A higher proportion of women work part-time, often in roles with limited pension benefits.
Auto-enrolment thresholds: In the UK, many women do not meet the £10,000 annual earnings threshold for automatic pension enrolment, excluding them from workplace schemes.
The flip side
While systemic reforms are essential, women are encouraged to engage in financial planning early, consider additional voluntary contributions, and explore investment opportunities to bolster their retirement funds. However, challenges such as financial literacy gaps and risk aversion in investment decisions may hinder these efforts.
Bridging the divide
Addressing the gender pension gap requires a multi-pronged approach:
Policy reforms: Lowering the auto-enrolment threshold and increasing minimum contribution rates could enhance pension inclusivity.
Employer initiatives: Offering flexible working arrangements and promoting financial literacy can empower women to prioritise pension savings.
Individual actions: Proactive financial planning, including regular pension reviews and diversified investments, can help women build more substantial retirement savings.
Closing the gender pension gap is imperative not only for individual financial well-being but also for societal equity. Through concerted efforts from policymakers, employers, and individuals, we can strive towards a future where retirement security is attainable for all, regardless of gender.
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