Gender pension gap to remain for decades without action

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Women’s workplace pensions are forecast to narrow only slightly to men’s in the coming two decades, according to a report that warns without government action the gap will persist for generations. 

Pension consultant Lane Clark & Peacock said it expected an improvement in retirement incomes for women as the gender gap in state pensions levels out, but it projected they would take home a weekly income half the size of their male counterparts by 2045 due to shortcomings in their private pensions.

It attributed this to the gender pay gap and to women leaving the workplace at a higher rate than men to carry out care for children and elderly relatives. The gender gap in private pensions is currently estimated at about 35 per cent, according to the Department for Work & Pensions. 

“Defined contribution outcomes are an incredibly direct mirror of the labour market. If you don’t earn enough and put in enough, you won’t have enough in retirement,” said Sir Steve Webb, a former pensions minister and partner with LCP. “The massive cost of childcare is an issue; why go to work if every penny is being used to pay for childcare?” 

Projections indicate women face a lengthy battle to narrow the pension gap, while millions risk losing out on a comfortable retirement. 

Despite the advent of auto-enrolment in 2012 helping boost pension savings for some women, many still fall under the £10,000 threshold due to the type of work they’re able to participate in alongside full-time childcare responsibilities. 

The state pension gap narrowed slightly due to the government offering national insurance credits to those in receipt of child benefits. In April, the government said it hoped to remedy shortcomings which meant those who opted out of the benefit did not receive the credit.

Research published by the Institute for Fiscal Studies, a think-tank, this year warned women’s contributions dropped significantly after the birth of a first child. 

“Women are particularly likely to leave work and when they go back it’s generally part time and this has a massive effect on contributions,” said Laurence O’Brien, a research economist at the IFS. 

The think-tank said more support was needed for women on maternity leave, including measures to boost child benefits to support parents. It warned that much of the pension difference still hinged on issues in the labour market. 

Webb said reducing the amount of time women spent out of work was vital. He advocated a combination of improved childcare provision and the implementation of a “use it or lose it” system for parental leave to ensure both parents were evenly sharing leave.

The Department for Work & Pensions said auto enrolment had “brought millions of women into pension saving” and it was working closely with employers to close remaining gaps that might impair women’s retirement.