Age hits equally, but the gender pension gap doesn’t
According to Amazon’s rankings, the best selling products for sixty-plus Brits are elevated toilet seats, pill organisers and pain relief creams.
As elderly age affects the population regardless of gender, Amazon’s pensioners’ insights don’t take into account whether the buyer is a man or a woman – raised toilet seats are so far yet to fall victim to the common ‘pink it and shrink it’ marketing strategy where products ‘for men’ are made smaller and pink to better satisfy the ladies’ needs.
Considering men and women’s purchasing power is equal, they are all likely to experience the aftermath of an inflation crunch bound to hit households amid one of the worst falls in living standards in the UK in modern times.
When inflation is high and earnings don’t keep up with the rising prices, saving for retirement becomes increasingly more challenging – as what we save for pensions tends to be a function of how much we earn and our ability to pile up money into a pot.
With women more likely to have lower paid jobs and multiple jobs, inflation crises are bound to hit them disproportionately over men.
Who’s afraid of the unpaid care work?
There has been much discussion in recent years of the gender pay gap. Some say it will shrink as we go forward. But for women approaching retirement, that won’t help: they will finish work with a pension pot 37.9 per cent smaller on average than a man’s, according to the latest official figures.
Private and state pension income is usually the main source of sustenance in retirement, so that gap matters.
The reasons behind this difference in retirement outcomes, which applies to a large and growing proportion of the female population, are endemic. The government recognises the gap as deriving from “historical differences in labour market participation”, in the words of Baroness Scott of Bybrook in a debate about the gender pension gap last July – differences which have been the pink elephant in workplaces for decades and that the industry has recently begun to address.
Those so-called historical differences however may not be so historical.
“My husband and I had very similar work patterns – we both worked full time for 40 years. He stayed with one employer for most of his career, I changed employers regularly to progress my career in the world of IT,” said Angela Madden, chair at Women Against State Pension Inequality. “He now has 40 years of qualifying National Insurance contributions, while I only have 17.”
Pensions legislation was very different then. “Anyone with an erratic work pattern – and this could apply to most women who had career breaks in the 70s and 80s to care for children – found it difficult to accrue occupational pension contributions”.
Women couldn’t take “career breaks” in the 70s, Madden explained, as jobs were rarely held open for them while they took some time off to look after their children, and they usually ended up getting a pink slip. The pension rules in play at the time were very different.
But while legislation has changed, some things haven’t.
Around the world, women spend two to 10 times more time on unpaid care work than men, reckon the OECD. Across the world women from different regions, socio-economic classes and cultures spend a big part of their day living out what might be called ‘traditional’ gender roles – in child, or elderly, care.
This is in addition to their paid activities, thus creating the “double burden” of work for women – and also putting them in the condition of either relying on someone else until the last days of their lives or facing relative poverty as a consequence of their eventual independence push.
To visualise it better: every minute more that a woman spends on unpaid care work represents one minute less that she could be potentially spending on market-related activities or investing in her educational and vocational skills.
This ‘hidden’ discrimination is one of the indirect causes of the gender pay gap, which, according to figures from ONS, in 2021 was a whopping 15.4 per cent amongst all UK employees. This pay gap adds to the overall inequality – if you’re not earning as much, you won’t have as much to contribute to your pension– eventually filtering through to the gender pensions gap. Women shouldering much of the care work burden also means the gap widens with age: older women experience a larger pay gap compared with their male peers than younger women with their male peers, as their ‘load’ grows bigger while approaching maternity age, making them more likely to be in part-time employment.
Sing along with the common people
Auto-enrolment, which began in 2012, is the most high-profile scheme to get all Brits putting cash away for their retirement.
Workers aged 22 and over earning more than £10,000 have to opt out from contributing to a workplace pension – which few do in practice.
Wonks at the Institute for Fiscal Studies suggested that this may contribute to lessening gender inequality in the future – and, in fact, the level of participation among both women and men is now considerably higher than before automatic enrolment.
A Department for Work and Pensions (DWP) spokesperson told Morning Wire more than 80 per cent of working-age women are now saving for a pension, up from 40 per cent before.
Yet even here, women are disadvantaged. They are more likely to earn below the earnings trigger – some 75 per cent of those earning under the £10,000 earning trigger are women.
“Automatic enrolment has helped include more people in pensions for the first time,” Tom Selby, head of retirement policy at AJ Bell, told Morning Wire
“Those were lower-earning people who didn’t have access to pensions before and these people were disproportionately women over men.
“That’s a good thing, but there are issues with the automatic enrolment – women still miss out.”
The reforms have helped to increase participation across different parts of society, but “they haven’t done the full job”, Selby said. “There are tweaks that could be made that may improve that slightly, although I think there is a debate to be had over whether or not you want people who are earning very low to be automatically enrolled into a pension.”
Honey, I shrunk the childcare costs
The gender pension gap is a critical long-term issue and as automatic enrolment was only introduced 10 years ago, it may well be water under the bridge in half a century. That is, if the UK manages to close the gender gap in the meantime. Doing so involves tackling causes, not just symptoms.
One common proposal is to provide affordable and accessible childcare services to support women in full-time employment. The UK has the priciest childcare in the developed world, think tank The Centre for Policy Studies (CPS) has highlighted.
The average annual cost of a nursery place for children under two also rose by nearly £1,050 (16 per cent) between 2018 and 2022, a Labour survey showed.
Pension trusts have called for grants to local authorities to cover the costs of 30 hours per week free childcare for all three and four-year olds and to provide tax reliefs on childcare costs for children under two years old.
These measures could make affordable childcare more widely available so that people who want to return to work can do so.
Don’t go breaking my pension rights
Another idea that has been floated is making pension rights a compulsory part of divorce proceedings.
As the law stands, pensions may only be taken into account if there is a financial agreement considered by the courts.
“Pensions are often the second biggest asset a couple owns after their house,” Claire Trott, Divisional Director of Retirement & Holistic Planning at St James’s Place told Morning Wire “They are also generally owned by the main breadwinner of the relationship, for various reasons including tax relief and employer contributions.”
But in divorce proceedings pensions are often forgotten or not given enough prominence because they are tied up until normal minimum pension age and can also sit in the “too complex” pile, Trott said.
Education to make one’s mind
Above all, a shift in mindset is needed. Surveys show that most women still don’t feel financially independent and able to make their own life choices, while depending on their partners’ income. A push for change needs to come from the top in order to be effective, with the process of “educating” workers being not so much about making a living as making people’s minds.
Britain’s biggest firms are making progress, but more can be done.
Providing more flexibility for part-time work, job-sharing, remote working, and flexibility on hours could help to attract and retain more female talent and drive women out of the kitchen and into the workplace – unless they’re professional chefs or are really, really passionate about cooking for their loved ones.