We need to talk about the gender pensions gap

The gap stands at 37.9% – an average of £7,000 a year less for female pensioners compared with their male counterparts. I know whose pension pot I’d prefer

Ever heard of the motherhood penalty?

It’s the loss in lifetime earnings experienced by women raising children and, in the UK, the childcare affordability crisis is pricing a growing number of women out of work.

Average nursery costs per week rose by more than 20 per cent between 2015 and 2022, while average weekly earnings rose by 14 per cent, according to the 2023 edition of accountancy firm PwC’s Women in Work report.

The motherhood penalty is a key driver of the gender pay gap. It’s why, with chancellor Jeremy Hunt’s Budget on Wednesday, many groups are calling for policy changes that include the provision of affordable childcare.

We all pay the price when women are priced out of work. The gender pay gap contributes to the gender pensions gap.

No woman plans to have a poor old age. But the gender pensions gap stands at 37.9 per cent – an average of £7,000 a year less in pension income for female pensioners compared with their male counterparts. I know whose pension pot I’d prefer.

These figures come from the trade union Prospect, which regularly reports on the size of the gender pensions gap, and it’s helpful because of the lack of government reporting in this area. The Department for Work and Pensions supports Prospect’s gender pensions gap figures.

One of the main drivers of the gender pensions gap is that during their working lives, women earn less than men. Reasons for this include women’s employment in lower-paid sectors, women’s employment in less senior roles, and women taking time out of work and working reduced hours in order to care for others, whether children or older relatives. Lower earnings by women across their working lives means less money paid into pension pots, and results in less money to live on in retirement.

There’s also the fact that women live longer than men, on average. Life expectancy at birth in the UK is 79 years for men and 82 for women, according to the Office for National Statistics, so those lower pension pots I just mentioned have to stretch much further.

And let’s not forget societal attitudes toward women’s roles in the workplace. While we have come a long way, some attitudes persist, and they can and do influence women’s career success and pay.

Research by the UK’s Money and Pensions Service on gender and financial wellbeing is a sobering read. It highlights that more than 50 years after the Equal Pay Act, just 57 per cent of men and 78 per cent of women think pay inequality is very wrong; only 48 per cent of men and 38 per cent of women think it’s wrong for the average earnings of men to be higher than those of women. Meanwhile, for Black and minority ethnic women, the ethnicity pay gap can often exacerbate our financial position.

Gender-based financial inequality exists. It’s important to shine a light on these hidden forces at work on women’s finances so we can raise awareness and make informed financial decisions on a personal and a collective level. This includes knowing that pensions are an important asset for discussion in any divorce settlement, particularly for women, and especially because it’s not yet compulsory to share pensions in a divorce.

It includes awareness that if you’re on maternity leave, or working part-time because of childcare, the best gift your other half can give you is to contribute to your pension. Or vice versa if you’re the one in work and your partner is on maternity leave. And knowing that, if you are a hiring manager, you should no longer ask candidates for their current salary as it only serves to reinforce historic pay gaps. Plus, surely you know the salary range of the role you’re seeking to fill.

Splitting household bills 50/50 with your partner, regardless of what you each earn, may be equal but it isn’t always fair. Consider splitting bills proportionately, based on your take-home pay.

Of course, while it’s helpful to be aware of the positive change we can make on a personal level, policy change is needed to solve the root causes of gender financial inequality. Many groups are calling for the provision of affordable childcare, reducing the earnings trigger for auto-enrolment into workplace pensions (which would see more women qualify for a workplace pension), and, of course, making pension rights a compulsory part of divorce proceedings.

Talia Loderick is a money coach. Talia helps people understand and take control of their behaviour with money so they can stop stressing about money and have enough to live well – now and in future. Visit: talialoderick.co.uk