Women left with half the pension pot, no matter the job

Analysis¹ of more than 4.5 million savers has found that that every single industry in the UK has a gender pensions gap, even those dominated by female workers.

On average, women’s pensions are half the size of men’s (£12,000 versus £26,000). Considering women are likely to live four years² longer than men, this issue deepens as they need to have saved around five to seven per cent more at retirement age.

The study by Legal & General found the gender pensions gap exists regardless of average pay across different sectors, and ranges from a gap of 59% in the healthcare industry, to 13% in courier services.

The healthcare (59%), construction (51%), real estate/property development (48%), pharmaceutical (46%), aerospace, defence and government services (46%), and senior care (45%) sectors were found to have the largest gender pensions gaps. Of these six sectors, three are key industries for female employment – healthcare, pharmaceuticals, and senior care³.

Source: Legal & General analysis of workplace member data from defined contribution pension schemes, 2022

Many different factors have led to the gender pensions gap but very few solutions are offered

There are many reasons for the gender pensions gap, ranging from women holding fewer senior positions and being paid less, resulting in lower pensions contributions, to the fact they are more likely to take career breaks due to caring responsibilities. Of those that have taken a career break, 38% did not know the financial impact it had on their pension contributions⁴.

Another potential driver is a significant gender confidence gap when it comes to managing pension pots. More than a quarter (28%) of women said they had confidence in their ability to make decisions about their pension, compared to almost half (48%) of men⁵. This lack of confidence extends further to other financial decisions, with women less likely than men to feel confident managing their investments (22% of women versus 41% of men), and their savings (56% of women versus 67% of men).

Legal & General is calling for all companies and pension providers to disclose their gender pensions gap, to raise awareness of it and work together to help close it across all sectors. For full details on Legal & General’s suggested solutions to close the gender pensions gap, please see notes to editors*.

While many factors behind the gender pension gap are out of most people’s control, there are some actions you can take to help reduce it:

• Contribute as much as you can to your pension - and start early. Compound interest remains hugely underrated and poorly understood by both men and women.
• Check the charges on your historic pension pots. See if consolidating your pots will bring them down.
• Plan for a future full of Saturdays. Everyone underestimates how much they'll need.
• Likewise, check how much your State Pension will be and when you'll get it. If it's not going to support your ideal lifestyle, plan how you'll cover any shortfall.
• Put a bit more into your pension whenever you get a pay rise.
• Talk through your pension planning with your partner. Make sure you know about each other’s saving plans, contribution limits and that you are both on the same page.
• Carry out a regular Midlife MOT. It'll help you see how your finances are doing, and allow you to check in on your work and health wellbeing too.
• Make use of free support like the MoneyHelper or Retirement Living Standards websites. You can also check out our own planning tools.
• Keep a regular eye on your pension to make sure you're in full control of it and saving for your ideal future.

References
¹The analysis is based on LGIM’s proprietary data on c4.5 million defined contribution members as at 1 April 2022 but does not take into account any other pension provision the customers may have elsewhere.

² ONS: Life expectancy at birth in the UK: 82.9 years for women vs 79 years for men; Office for National Statistic, 2018 to 2020. Average four years.

³ According to the ratio of female members across the Legal & General book of business

⁴ Legal & General Insight Lab survey of 2,135 workplace members was conducted 4 - 26 July 2022

⁵ Opinium survey of 2,001 UK adults was conducted between the 4th and 8th February 2022

* Legal & General (L&G) is actively involved in exploring solutions with government and industry

• L&G recognises that urgent action needs to be taken now and is calling for all companies and DC pension providers to publicly disclose their own gender pensions gap, so that all stakeholders can understand the issue and work to fix it.

• L&G has reviewed its own gender pension gap and will monitor it annually to ensure it is making progress, by reviewing internal support, processes and policies to make changes such as better support for menopause and a review of paternity and shared parental leave. Current analysis shows that there is a 60% gender pension gap for L&G retirees at the point of retirement with an average gap of 32% for current savers.

• In addition to disclosing its own gender pension gap, L&G is committed to raising the profile of the gender pension gap across the companies it invests in and will continue collating data in order to include it in its stewardship activities going forward, as well as working with regulators, trade bodies and other providers on longer term solutions.

• Going further, L&G has created a working group with 14 of its largest clients with 535,000 members and assets of over £7bn, to help them tackle inequality in their own pension schemes by the end of 2022 and plans to expand this group further in 2023.

• In terms of regulatory reform, L&G submitted a number of recommendations to the Work & Pensions Select Committee in January 2022 as part of the Pension Freedoms Consultation, including:

• Reducing the eligibility age for auto-enrollment to 18 and basing auto-enrollment pension contributions on the first £1 of earnings by removing the £10,000 eligibility trigger.
• Allowing greater flexibility for couples to pay into each other’s pensions, as well as considering an increasing the maximum allowed.
• Encouraging pay and job progression for part-time workers and examine whether eligibility to means-tested benefits acts as a barrier to women seeking to increase their income and savings ability.
• Promoting the inclusion of pensions in divorce proceedings.
• Prioritising the provision of suitable and affordable childcare to encourage women to work more hours.