The gender pension gap: Women retire with half the income of men

Whilst the UK boasts greater gender equality than ever before, the gender pension gap remains stark.  A continued gender imbalance in earnings and the fact that women are more likely to work part-time or take career breaks (often to have children) leads to a gender imbalance in pension savings.  Women on average retire with half the income of men. 

Why women’s pensions fall short

There are several things that contribute to this.

  • Lower pay equals lower savings – inequality in pay doesn’t just affect women in the here and now, it also has serious implications for their futures.
  • Returning to full-time work is tough – those who have had a career break may be seen as less skilled and out of date.
  • Women are still much more likely to stay home to care for children or elderly relatives.
  • Employers are afraid to embrace greater flexibility – women returning to work often seek something that is more flexible or part-time, but this limits job options, pushing many into low-paid work and hindering career progression.

In order to redress this imbalance, we need to promote financial literacy and empowerment among women.  Many women lack the knowledge and tools to effectively manage their pension savings and investments.  Providing education and resources on financial planning, retirement savings and investment options can empower women to make informed decisions about their pension funds and secure their financial future. 

Knowledge is power and a little understanding can go a long way.  In a society where women live longer it is important that they take action themselves.

Is more free childcare a solution?

But what are the government doing to help? One of the news stories from the budget was about increasing childcare provision to help parents and especially Mums back to work. But will it help address the gender pension gap?

The Government announced that hundreds of thousands more working parents will be supported through an extension of free childcare, more than doubling the current support in place. This will help mums in particular to stay in work.  It is a known fact that childcare is one of the biggest costs facing working households, so this should reduce the barriers preventing some parents from going back to work.

Currently, parents who work more than 16 hours a week and earn less than £100,000 are entitled to 30 hours free childcare a week for children aged three to four. The scheme is being extended so that working parents of all children over the age of nine months will also be entitled to free 30 hours of childcare.  However, some providers may ask for charges in addition to the free childcare.

There is due to be a staggered approach as to when the free childcare will start with the aim of giving childcare providers time to prepare for the changes, ensuring there are enough providers ready to meet demand.

Knowledge is always power

While the boost to childcare has been welcomed, fear remains for the struggling sector. There has been a reduction in the number of providers able to keep their doors open due to funding shortfalls and therefore the big question is, will there be sufficient childcare places to meet the demand of parents working full-time? This remains to  be seen.

Whilst the increased provision of free childcare is a step in the right direction, there are no guarantees here that this will positively impact women’s potential for work and therefore help close the pension gender gap. We must move towards greater financial literacy amongst women and provide much better support in terms of the information available, so that they can take control of their financial future.