Kelly Parsons, Head of DC Proposition at Broadstone, commented: “The DWP’s research highlights the growing challenge around pension adequacy in the UK and the extent to which retirement outcomes are still heavily shaped by people’s working lives. The report shows that people with more disrupted employment patterns, lower earnings and caring responsibilities are significantly more likely to face poorer retirement incomes, with women particularly exposed to these risks.
“It underlines how periods spent out of the workforce caring for children or relatives can have a lasting impact on long-term pension saving. For example, there is a significant widening of the gender gap in pension contributions upon the birth of a first child – a divide which continues to increase over the consequent years.
“This is reflected in the stark disparities in pension wealth emerging as people approach retirement. According to the Pensions Commission, women nearing retirement currently have around half the private pension savings of men, with median pension wealth of £81,000 compared to £156,000 for men.
“Women are more likely to experience interrupted career paths, part-time working and lower lifetime earnings and, as a result, are more likely to reach later life with lower levels of private pension income and greater reliance on the State Pension or the income of their partner.
“The report also reinforces broader concerns around adequacy, with many people approaching retirement lacking confidence that they will achieve the standard of living they expect in later life. While automatic enrolment has transformed pension participation, contribution levels remain too low for many savers, especially those with interrupted or lower-paid careers.
“It is encouraging that the Pensions Commission looks set to focus on how government can reduce the gender pension gap as part of its wider review into the future of the retirement system. This demonstrates why pension policy cannot be separated from wider labour market inequalities. Without further action to support carers, lower earners and people with non-linear careers, there is a real danger that today’s working patterns continue to translate into entrenched financial inequalities in retirement.”
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