The gender pension gap

Happy International Women's Day.

On this day, it's important for us to recognise the ongoing struggle for gender equality and acknowledge the persistent gender pension gap that affects women worldwide. It is a crucial issue that demands our attention and action.

The representation & opportunity gap

It is impossible to have a discussion around the gender pension gap without first considering a major root cause – the representation and the opportunity gap.

Over 45 years after it became illegal to pay women less than their male counterparts, it's a sign of progress-not-perfection that a 15.5% gender pay gap still exists.

The Sex and Power report from the Fawcett Society found that across different areas of society, men still outnumber women in positions of power by a ratio of two to one, with ethnic minority women facing even greater levels of under-representation.

Looking at the largest companies, the report said there were no women from ethnic minority backgrounds at the head of any of the top 100 listed companies in the UK. Instead, white males continued to “dominate” boards and executive committees, making up three in five of FTSE 100 board seats. Despite genuine efforts in corporate Britain to improve the boardroom diversity, the number of white men in ‘top 40’ positions in FTSE 100 companies is actually increasing.

There are many interconnected issues leading to women being underrepresented at the highest organisational levels, including:

• Inequitable promotion rates: According to?LeanIn.Org?and McKinsey & Company’s 2022 Women in the Workplace Report, women fall behind men at the first step of moving from entry-level to manager (sometimes referred to as the “broken rung” in the career ladder). For every 100 men who are promoted from entry level to manager, only 87 women are promoted. This leaves too few women in the leadership pipeline to then promote into senior positions.
• Inequitable attrition rates: Sometimes called the “leaky bucket”, this can be a signal of inclusivity and belonging issues in the company culture. Women leaders are leaving their companies at the highest rate ever seen, and at a higher rate than men in leadership: for every woman at the director level who gets promoted to the next level, two women directors are choosing to leave their company.
• Inequitable access to career-boosting projects and opportunities: For example, 81% to 88% of white men report fair access to career-enhancing assignments, while as low as 50% of other employee groups report the same.

The gender pension gap

Across the UK workforce, gender difference in earnings is a key factor preventing women from contributing to a pension. The reasons for the gender pay gap are varied, but can broadly be organised within three areas:

1.?????Unpaid caring and household responsibilities can limit the amount of time available for paid employment. This is made worse by a lack of flexible working in industries where work-life balance is poor. Figures from the Office for National Statistics found that Women carry out 60% more unpaid work (including housework and childcare) than men.

2.?????Occupational segregation whereby women and men are concentrated in different sectors/roles due to social stereotypes and cultural norms, but also linked to opportunities for flexible working.

3.?????Different pay grades in areas of the workforce with high proportions of women. As a result, women are substantially more likely (35%) than men (11%) to earn less than the ￡10,000 threshold for automatic enrolment.

According to Aviva, a recent report found a massive 40.3% gap in pension savings between women and men — that's an average difference in pension income by gender of about ￡7,500 a year.

The Phoenix Group report ‘Caught in the Gap’ showed that during the first half of their careers, women typically contribute a slightly larger percentage of their income to their pension than men. However, due to differences in average income, women begin to pay less into their pension each month from around the age of 25 onwards.

Overall, the largest difference in the value of men and women’s pension contributions comes at the age of 45–54. This is because of the cumulative effects of broader gender differences, with respect to pregnancy, marriage, divorce, the menopause, and caring responsibilities, among other factors.

Women are more likely to be economically inactive due to long-term health conditions than men. By middle age – where care responsibilities fall to one in four women in the UK – men are paying almost ￡80 more per month into their pension than women.

When you consider intersectional elements of gender and ethnicity, the figures are even more stark - on average the gap in pension income between a female pensioner from an ethnic minority group and a male pensioner from white ethnic groups is 51.4%.

Visit Maji to see how we can support your employees with their pensions.

Article written by Mat Castle, Maji's EDI & Sustainability Lead