Financial Wellness
How employers can help to mitigate the gender pension gap
By the age of 45–54, men are saving around 50% more into their workplace pension than women. And upon retiring, women in the UK will typically have a pension pot about a third of the size of a man’s.
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Improving flexible working and supporting those with heath conditions can help to mitigate gender pension inequality.
The UK gender pension gap is more than twice as large as the gender pay gap1. By the age of 45–54, men are saving around 50% more into their workplace pension than women. And upon retiring, women in the UK will typically have a pension pot about a third of the size of a man’s2.
Standard Life is part of Phoenix Group, this gives us access to Phoenix Insights. These findings are from the report, Caught in a gap – the role of employers in enabling women to build better pensions – produced by Phoenix Insights.
So why do women suffer even more inequality with respect to their pension, than with their income?
One reason appears to be a lack of widespread support for women to remain in paid work at different stages of their life. This affects adversely their ability to contribute enough to their pension to guarantee a good standard of living in retirement.
Need for flexibility
Caring responsibilities and a lack of flexible working in some industries leaves many women trailing behind men when it comes to saving for retirement.
For instance, one-in-four women aged 50–64 have caring responsibilities for older or disabled loved ones, according to the Centre for Progressive Policy. And one-in-five women have reduced working hours because of adult caring responsibilities.
Furthermore, in some cases women with caring responsibilities are confined to lower-paid – seemingly more ‘flexible’ – roles. This means they struggle to progress because senior roles are not afforded the same flexibility.
Historically, women have also relied on part-time work to enable them to manage paid work alongside caring responsibilities. Yet women suffer a long-term pay penalty for this: while the full-time pay gap is 8.3%, the pay gap across all workers is 14.9%, according to the Office for National Statistics.
And it cannot be assumed that part-time work is inherently flexible. While employees have the ‘right to request flexible working’ as a statutory minimum, this is not a day-one right, nor are employees able to make more than one request per year.
We therefore welcome the government’s recent commitment to enable greater access to flexible work, and anticipate it will help to close the gender gap.
Health conditions
Women are more likely to be economically inactive due to long-term health conditions than men, according to the Office for National Statistics. One-in-ten women leave the labour market because of menopause symptoms or health conditions linked to menopause.
And around a fifth of women avoid disclosing menopause symptoms out of embarrassment, or choose not to seek promotion because of the impact on their ability to work, according to the Fawcett Society.
Women also reported taking time out of work to manage health conditions such as endometriosis, polycystic ovary syndrome, or severe period pains3.
This suggests that some women may lack the necessary support from their employers (for example, through the provision of flexible working), to enable them to remain in paid work during this time.
Without formal policies, some women may feel that they may be overlooked (or treated unfavourably) by less sympathetic managers when it comes to promotion or career development.
Five recommendations
Employers can make a big difference by helping to ensure that women can access good quality, sustained employment as they care for children and other loved ones. Helping women to manage health-related issues and changes in their personal relationships will also help.
Here are five recommendations that might help employers to mitigate the gender pension gap:
1. Re-enrol workers into their pension annually, instead of every three years. This will give workers the opportunity to re-engage if they have taken career breaks or opted out because of a lack of affordability. Re-enrolling workers annually can also help employers to understand why people might not to opt back into the scheme and allow them to act accordingly.
2. Continue employer pension contributions for employees during parental leave. Also actively highlight to employees that partners, family or anyone else can make additional pension contributions to support.
3. Adopt a minimum of five days unpaid leave for those with caring responsibilities, and, where possible, five days paid carers leave.
4. Normalise flexible working from day one and highlight this across all job roles. To further normalise flexible working, employers might consider encouraging all employees to be transparent about their working hours, and encourage senior male employees to visibly adopt flexible working. Employers can also allow for flexible working contracts to be changed more than every year, and encourage flexible working discussions at line management meetings.
5. Visibly outline the support available to manage physical and mental health conditions – explicitly including reproductive health conditions such as miscarriage, fertility treatment, endometriosis and menopause symptoms. This could be through a holistic health management policy programme.
The benefits from acting on these recommendations are likely to be felt beyond just the gender pension gap. In time they should also lead to more inclusive, happier and more productive workforces.
1The gender pension gap is between 34.2% and 40.5%, estimates the Organisation for Economic Co-operation and Development. Meanwhile, the gender pay gap is currently 14.9%, according to the Office for National Statistics.
2Facing an unequal future, NOW: Pensions, 2022.
3Endometriosis costs the UK economy £8.2 billion a year in loss of work, treatment and healthcare costs, according to Endometriosis UK.
