Tuesday 8th March, 2022
Happy International Women's Day! Here's to all the hard-working, boundary-breaking, name-taking women currently saving with Penfold.
This year, we wanted to take the time to highlight one of the many issues impacting women and financial inequality - the gender pension gap. It's an issue close to our hearts here at Penfold, and one we think needs a lot more attention.
So, here's what it is, why it's a problem and what we can do to help fix it.
The gender pension gap refers to the chasm in pension savings between men and women.
The difference is prevalent at every age, but starkest at retirement, with many women leaving work with substantially less saved in their pots for life after work. In fact, research has revealed that right now in the UK, women's pension pots in retirement are half the size of mens.
It's something we've noticed among our savers too. More than 60% of Penfold users are men - this rings true across all ages, demonstrating how women feel less able to start a pension.
Even more worrying is that on average, women's total pension savings are 27% less than men's. Given the long-term nature of savings, this only compounds over time, meaning that by retirement, women's pensions are further left behind.
We've also noticed then men tend to contribute higher amounts into their pension. They also contribute more often, with many women opting to pay in just a few times a year.
It makes for uncomfortable reading. But how did we get here? Why are women saving so much less into their pension than men?
As with many of the issues impacting financial inequality, the underlying causes behind the gender pension gap are complex and multifaceted. The main factors are:
We've also noticed another factor that may hint at the lack of financial education afforded to women in the UK - appetite for investing risk. Let's take a quick look at each in turn.
It's no secret that on average, women are paid less than men. The latest figures in the UK show that across both full-time and part-time workers, women are paid 15% less than men.
Naturally, having a lower income has a huge knock-on affect on pension contributions. The fact that women earn less month after month means they can't afford to put as much in their pension. Unfortunately, this only gets worse over time, as men's higher earnings means their pensions pull further and further ahead.
Another huge factor comes from the fact that more women work part-time in the UK. Women are significantly more likely to work in part-time jobs, particularly after child birth.
Once again, this leads to lower income and less expendable income to contribute into their pension. In fact, part-time women are some of the worst affected by the gender pension gap.
Similarly to the point above, women are also negatively impacted by being more likely to take a career break. More than half a million women take a career break in the UK, often during what is considered 'peak earning years' of 30-55.
The end result is that their pensions take the hit.
Finally, one of the lesser studied factors influencing the gender pension gap is the lack of financial education afforded to women.
It's a sad truth that even in 2022, many women are discouraged from taking an interest in finances and how they work. One way we've seen this manifested at Penfold is women's predilection to opt for less risky investments.
Generally, selecting a pension plan with a higher proportion of volatile (more likely to rise and fall in value) investments like stocks and shares offers more opportunity for pension growth.
Over the long-term, these risky investments have plenty of time to ride out any short-term losses and have in the past offered greater returns than 'safer' investment stratgies.
At Penfold, we've noticed our own female savers are prefer safer and more responsible investing. Our Standard Risk Level 4 plan, our most popular (and highest risk) pension plan is only 1/3rd women. Conversely, 54% of the savers in our Sustainable plan are women - that's despite women being in the overall minority.
It all stems from men and women's varying approach to saving and the future, something we spoke to a psychologist about last year.
As we've outlined, the problems contributing to the gender pension gap are ranging are complex. And that means fixing it won't be quick or easy.
Many of the economic factors that leave women disadvantaged are societal and until larger issues like the gender pay gap, auto-enrolment and more affordable child care are addressed
But that doesn't mean we should give up. There's still plenty of way we can be proactive today.
There are things we can all do right now to help give our pensions the best possible chance of providing the retirement we so richly deserve. Firstly, by educating ourselves.
Pensions are seen as a dull, complicated that are only important for the older generation. But by taking an active interest in our finances, we help arm ourselves with the knowledge that leads to financial indepence and security.
You can check out Penfold's Pension Guides today to get started. Here are a couple of guides we'd recommend for beginners:
The better we understand the pros of a pension and how they work for us, the better the chances we have of securing our financial futures.