Much has been made about the gender pay gap, with efforts to bring incomes between men and women more in line.
While those in work now can benefit from this, many women who are approaching retirement may suffer when it comes to their pension due to unfair systems of the past.
Here we’ll dig into the numbers behind the troubling headline and investigate how it has happened.
The gender pay gap in UK society
The gender pay gap measures the differences between incomes of men and women in the UK. It takes all jobs into consideration and does not specifically compare those in like-for-like positions for its overall figures.
This means the study does not just highlight differences in salaries of similar jobs, but also helps to build an understanding of how and why different groups move into the careers that they do across multiple pay grades.
According to the government’s latest figures, the pay gap across all levels of employment in 2020 sat at just over 15%. When comparing those in full-time employment, the gap falls to 7.4% – the lowest figure since data was first collected in 1997.
How it looks in pensions
However, research from equity release consultants, Key has revealed that the gender pay gap is much more stark among those approaching or into retirement age.
- Women retiring in 2021 expect a 25% lower average retirement income than men, roughly equating to £4,600 per year.
- 20% of retiring women don’t know what their income will be, compared to just 9% of men.
- Expected annual income for men is around £23,646 compared to £18,991 for women. Over a 20-year period, that equates to a £93,000 difference.
- The biggest proportion of men’s retirement income comes from company pension schemes (34%) vs 29% for women, who are more likely to rely on state pension.
- Women are more likely to look into unlocking funds through their property (15% vs 10%).
Why is this the case?
It seems that out-of-date views towards women’s careers are almost certainly behind these figures.
While girls are now encouraged to seek careers that they wish, while maternity policies protect women’s employment rights when they give birth, many women of previous generations were expected to be homemakers and childminders.
Will Hale, CEO at Key said: “With women typically earning less over the course of their careers, more likely to work part-time or need to juggle their career and caring responsibilities, the gender pay gap quickly becomes the gender pension’s gap at retirement. It is disheartening that in 2021, women still expect 25% less than their male counterparts and nearly a third expect their income to fall below Joseph Rowntree Foundation’s (JRF) Minimum Income Standard.”