It has been revealed that the pension gap between men and women is set to widen to a staggering £100,000. According to research from Scottish Widows, this would mean that women in their 20s would have to work for an additional four decades if they want to close the huge gap in their pension pots by the time they retire.
Historically, women have always had poorer pension prospects than men for a variety of reasons. As this article highlights, it can be down to taking off time to raise a family, moving to part-time hours, and working in lower-paid industries, among other things. However, historically, this gender pension gap has always been an issue even without other factors being considered and will worsen, according to officials.
Wage increases lead to inequalities
According to government officials, several reforms brought in over the years have made it easier for women to build up their pensions. The DWP said that one of the measures that had helped was automatic enrolment , which had resulted in more women joining pensions schemes for the first time in their lives.
Data shows that during the first 15 years of working, women save on average around £2,200 per year toward their pensions. This compares to an average of £3,300 for men.
While the gap may not seem all that huge to start with, experts said it increases over a lifetime of working. This is because increases in wages lead to what was described as "significant inequalities in retirement income".
A senior official from Scottish Widows, Jackie Leiper, said, "We know that young women have been some of the hardest hit by the short-term financial impact of the pandemic and this has only exacerbated the challenge of reaching pensions parity. At the same time, caring responsibilities and high childcare costs are keeping women out of the workforce, lowering their contributions and denting their pension pots."
Closing the gap
One of the ways in which women can help to close the gap, according to pension experts, is to increase their contributions as early on as they can. By raising them by 5% when they begin working, the gap could be closed almost entirely by the time their retirement rolls around.
However, for those who continue with standard contributions throughout their working lives, the gap could become increasingly significant.