Penfold Reveal How Employers Can Close the Gender Pension Gap

In 2022 more women than men will be affected by the cost-of-living crisis, as more women work part time, they hold 60% of below living wage jobs, and the Office for National Statistics reported a 15.4% gender pay gap in 2022. Lower pay means essential costs are a higher proportion of outgoings, as those on smaller salaries still have to pay the same for food, energy, accommodation, car insurance etc. Further price rises, especially for energy, now mean that for some, basic living costs are exceeding earnings. Not only this, but lower wages mean that there remains a difference in pension savings known as the Gender Pension Gap. 

The gap exists at every age, but it is most noticeable when a person retires as many women leave the workforce with significantly less money than their male counterparts. In fact, according to studies, women’s pension funds in the UK are currently only half as large as men’s. Office for National Statistics revealed that for private pensions specifically, the median pension wealth of men (£315,300) is nearly double that of women (£157,900).

Sadly, amongst our own customers, the discrepancy between male and female saving rates is prevalent. Only 27% of Penfold users are female identifying; this illustrates how women may feel less qualified to begin saving for retirement. The pensions industry as a whole needs to tackle the issue of the gender pension gap head on and build a proper plan for increasing financial literacy among women of all ages. By landing the importance of saving into a pension for long-term financial security and independence, we hope to close the gap and ensure more women are set up for a worry-free retirement.

Why do women earn less on average?

There are many inequalities between men and women in the workplace, one of them being the difference in wages. Whilst the gender pay gap has been declining slowly over time, falling approximately a quarter among both full-time employees and all employees, in 2022 the gap among full-time employees increased to 8.3%, up from 7.7% in 2021. There remains a large difference in the gender pay gap between employees aged over 40 years and those aged below 40 years and compared with lower-paid employees, higher earners experience a much larger difference in hourly pay between the sexes.

Working part-time 

Due to lifestyle differences, such as raising children and unpaid care, women are far more likely than men to be working part-time, which is one of the main causes of the gender pay gap and earnings inequality in the UK. Compared to 15% of men, 60% of women who were employed between July and September 2022 worked part-time. Part-timers receive lower hourly wages than full-timers do. The median hourly wage for part-time employees is £10.65, while the rate for full-time employees is £15.59. Because women work fewer hours than males and are paid less for those hours, the gender pay gap is worse for all employees (15.4%) than for full-time workers (7.9%).

Motherhood Penalty

The maternal pay gap measures the wage difference between mothers and non-mothers, who are typically characterised as women without dependent children in econometric studies. The pay disparity between mothers and fathers is also measured. 

The biggest source of the gender pension gap is that women spend more time than men outside of paid employment doing unpaid caring, for example looking after young children or taking care of elderly relatives. Women perform 60% more unpaid work than men do on average. The only area where men perform more unpaid work than women is in transportation (driving oneself and others). Women spend about twice as much time as men on unpaid childcare, housekeeping, and cooking.

Mothers make up the majority of part-time workers; they frequently do so in order to care for their children or other persons. But they pay dearly for attempting to strike a balance between these two positions.

Industries with the best and worst gender pay gap

There are a total of 412 jobs included in the ONS’ 2022 UK gender pay gap statistics. Among the 330 positions with solid figures that remain, there is a pay disparity that favours males in 77.6% of cases, women in 21.2% of cases, and there is no pay gap in 1.2% of cases. 

Clinical psychologists (37.4%), auto technicians, mechanics, and electricians (34.1%), and librarians (29.9%) are the three professions in the UK with the largest gender pay discrepancies in favour of males.

On the other hand, other drivers and transport operatives n.e.c. – including transport worker, bus inspector, and port assistant (-51%), Medical secretaries (23%) and Chartered surveyors (-20%) are the three full-time occupations with the largest gender wage differences in favour of women.

How the gender pay gap affects pensions

The gender pension gap is especially harmful because it really begins to hurt women at a time when they have little control over the situation.

New data demonstrates that women have smaller pension pot sizes in every age category, with the situation dramatically worsening as they get closer to retirement, illuminating the startling consequences of the gender pension gap.

According to Penfold’s data, the average pension pot value of a male is 22% bigger than a female with £1209 more saved on average. 

Employers could play a pivotal role in closing the gender pay gap and should have a responsibility towards improving the retirement prospects of women. If this doesn’t change, more and more women will be disadvantaged, having fewer freedoms and options as they approach and enter what could be a less comfortable retirement.

Financial Literacy and Women

The gender pay gap does not appear to be narrowing as 2023 approaches.

Even as 2022 draws to a close, many women are still deterred from taking an interest in finances and how they operate. Women tend to favour less risky investments, which is one way we’ve noticed at Penfold that this is reflected. In general, choosing a pension plan with a higher percentage of volatile investments, such as equities and shares, offers more opportunity for pension growth. These risky investments have historically provided higher returns than ‘safer’ investment strategies because they have a longer time to weather any short-term losses. Our female savers at Penfold have shown a preference for safer and more ethical investing.

Helping to build a successful pension pot as an employer

The earlier you begin making payments into your pension, the more you’ll be able to benefit from compound interest’s beneficial effects as it builds up over time. It doesn’t matter if you can only make little payments. Create a monthly payment plan for your pension now, and as your income increases in the future, you can increase it.

1. Financial education programmes for female employees 

Financial literacy is necessary not just to help women better manage their household and personal finances, but also to provide them the power to pick and access the right financial services and products, as well as to create and run their own businesses. Employers can help with that by organising financial literacy workshops for their employees in order to build awareness around the topic of personal finance.

2. Ensure transparency over pay gap and taking steps to mitigate the gap’s impact on pensions 

Closing the gender pay gap has numerous advantages for organisations, including increased revenue and growth, the capacity to recruit and retain top talent, the promotion of gender equality, the chance to improve public perceptions of your organisation and the ability to avoid reputational harm.

3. What to do with your pension during maternity leave or career break

• Due to the fact that most pension plans will consider approaching maternity leave to be a “lifestyle event,” many women will be able to modify or cancel their pension contributions. Because the benefits might endure for a very long period, you shouldn’t expect it’s an easy approach to save money.
• Instead of paying pension payments based on your pre-maternity earnings, you will do so based on your maternity salary. This implies that if you make the same percentage contribution but your salary is lower, you will be saving less money overall. This has two implications: first, it might deduct less from your paycheck each month than you anticipate; second, if you go back to work, you might have to make up the difference.

4. Collecting feedback from female employees 

It’s crucial to regularly review the benefits employees receive, especially ones that might have financial implications. Seeing if benefits are set up without any unexpected hurdles can confirm that the employer is having the appropriate dialogues with employees.

Sending out an annual survey asking employees how they feel about the retirement and whether they require any additional support and guidance can help you understand how well or ill prepared they are for their future.

Chris Eastwood, Co-founder and CEO of Penfold:

“The gender pension gap is a hugely complex problem with a number of societal conditions preventing us from solving it. That said, there are ways we can help in the short term and it really starts with education. Only when women understand the importance of a pension, how you go about building a healthy pot and the impact of wage discrepancies, maternity leaves and part-time work on final pot value – will we start to see an improvement in the gap. The onus is on employers and the industry alike to take into account the specific needs of women when it comes to saving and to build products and communications that work for both genders. At Penfold, we’re on a mission to enable everyone to save towards a worry-free retirement and achieving that mission starts with encouraging more balanced saving rates among both men and women.”