Women are much more likely to pay the minimum amount required into their pension under auto-enrolment, according to research from Standard Life, part of Phoenix Group, highlighting the differences in pension contributions between genders.
Standard Life’s Retirement Voice study finds almost three quarters (73%) of women say they pay the minimum amount they’re required to pay in, which is 5% of their salary then topped up by 3% of their salary from their employer, or the minimum amount their employer recommends – compared to 58% of men. A quarter (25%) of men regularly pay in more than the minimum amount, whereas just 17% of women do the same. Meanwhile one in ten (10%) men make occasional extra lump sum contributions, but this falls to only 5% of women.
Gender pension gap
The disparity between contribution levels is one cause of the UK’s gender pension gap, which was estimated to be almost 40% in 2019-20. As well as contributing less as a percentage of their salary to their pension, women are also 32% more likely to reduce their working days for an extended period of time, according to think tank Phoenix Insights, lowering their earning potential.
Women in work are also more likely than men to fall under the auto enrolment threshold (35% vs 11%), take career breaks due to life events such as motherhood, childcare and caring responsibilities, and also be economically inactive due to long-term health conditions. All of these factors can have a negative impact on women’s financial futures.
Neil Hugh, Head of Workplace Proposition at Standard Life, commented: “The disparity in contribution levels between women and men is leading to financial inequality in retirement. Women are more likely to pay the minimum into their pension and so more likely to find themselves financially disadvantaged in retirement than those who have topped up their contribution levels or paid in one-off lump.
Auto-enrolment has been a huge success bringing over 10 million more people into the pension system but irrespective of gender the current minimum contribution levels are simply not high enough for savers to achieve a comfortable retirement, and while we hope this changes in the future, for now we have a significant under-saving problem.
“The gender pension gap is also exacerbated by life stages that can impact women’s earning power – such as taking time out to look after children, the menopause or long-term health conditions. Despite shifts in culture and attitudes over recent decades, women still shoulder more than their fair share of caring responsibility for vulnerable adults, like elderly parents, as well as their children. Hopefully the expansion of the government’s free childcare offering announced at the Spring Budget will start the long journey to improving the situation for women – but to accelerate progress, expansion of the auto-enrolment scheme is badly needed.”
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