19 May 2022
If you are covering ‘gender pensions gap day’, please see the following comment from Megan Rimmer, financial planner at Quilter:
“Today marks ‘gender pensions gap day’, the day when female pensioners finally begin being paid. We are all well aware of the gender pay gap suffered by working women, but it is equally important to acknowledge that when those women leave work as retirees, the gap widens significantly.
“The average pensions income gap between men and women is 38%. While a worryingly high figure, the main drivers of this difference are already known and are related to work. It should therefore come as little surprise that the inequalities experienced by women in their working lives translate into their retirement. Not only do we know that women earn less than men on average, meaning they have less money to save into a pension in the first place, but they are also far more likely to have differing work patterns throughout their lives than their male counterparts who tend to remain steadily in full time roles.
“The private pension system – unlike the state pension system – often amplifies these differences further. Though women currently earn less than their male counterparts, over a working life this can contribute to an even greater difference in pension wealth by the time they are approaching retirement. This is primarily due to the fact that more of men’s earnings qualify for pension contributions, with women being disproportionately affected by earnings thresholds and qualifying earnings limits for auto-enrolment.
“This already worrying situation is also not helped by an archaic pension taxation system, which means some women are disadvantaged. After much posturing, over the past couple of years the government finally started to make headway on how to fix the discriminatory issue of net pay schemes versus relief at source, which sees the lowest paid in net pay arrangements miss out on tax relief. Women are the overwhelming bearers of this injustice as they account for approximately two-thirds of the people impacted.
“In October 2021 – well over a year since the launch of the initial consultation - the government announced that it will “resolve the anomaly by introducing a system to make top-up payments directly to low-earning individuals saving in pension schemes using a net pay arrangement from 2024-25 onwards.” While any progress on this issue is welcome, the delayed resolution will mean many people, the majority of which are women, will be losing out for some time yet.
“There are long roads ahead in terms of truly improving gender equality, as the legacy of inequality will echo throughout many arenas for some time to come, with pensions a key example.”
