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Gender Pension Gap

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The potential barrier to reaching the same savings levels as men

The gender pension gap is an issue that extends beyond just the disparity in earnings between men and women. It also encompasses other aspects such as financial confidence, engagement with financial products, and socio-economic factors.

According to new research, women are 33% more likely than men to say they do not understand how their pension works, indicating a lack of financial confidence[1]. This lack of confidence may explain why some women are less likely to engage with financial products. For instance, women are 38% less likely than men to have a Stocks & Shares ISA and 32% less likely to have a private pension.

Career breaks for childcare

This engagement gap, along with other factors like the gender pay gap, could result in young women in the UK (aged 22 to 32) having just £12,873 per year by the time they retire in the 2060s1. In contrast, young men are projected to have nearly a third more, receiving an average of £19,803 in annual income.

The research highlights the gender pay gap also contributes significantly to the gender pensions gap. By the age of 27, women already earn £10,000 less than men of the same age. Other factors impacting women’s pension savings include being less likely to hold senior leadership positions and being more likely to take career breaks for childcare.

Reaching the same savings levels

According to the research, young women are currently projected to have £300k less in their pension pots than their male counterparts by the time they reach the current state pension age. Women are also more likely to work part-time or on reduced hours, take career breaks for childcare, act as unpaid carers, or need time off work for medical reasons, such as menopause.

In addition, women often self-identify as having lower confidence regarding savings and investments. This presents another potential barrier to reaching the same savings levels as men.

Addressing this issue requires a multi-faceted approach that includes promoting financial literacy among women, creating policies that support women during career breaks, and addressing the gender pay gap.

Source data:

[1] Analysis based on the following research and assumptions for Legal & General by Opinium Research conducted 2,000 online interviews of people aged 22-32 between the 15th and 29th August 2023 – CPI = 3% • Salary premium = 1% – Salary increase = 4% p.a. (this assumes that salary increases on an annual basis up to retirement at 68) – Median male salary at age 27 = 35,000 – Median female salary at age 27 = 25,000 – Start saving into a workplace pension at age 22, retiring at age 68 -Investment return on pension pot, assuming broad 60/40 asset split, (7% p.a., 4% real) – Qualifying earnings – Currently (£6,240 to £50,270), Historical years (actual LEL and UEL), Future years (increased annually by CPI assumption) – Income based on current Legal & General annuity – fixed rate, single person annuity at age 68, with a 10-year GMPP. Women are 33% more likely than men to say they do not understand how their pension works – 320 (men) – 425 (women) = 105. 105 / 320 = 32.8125% (33%) Women are 38% less likely than men to have a stocks and shares ISA – 324 (men) – 201 (women) = 123. 123 / 324 = 37.962962962963% (38%) Women are 32% less likely to have a private pension -324 (men) – 221 (women) = 103. 103 / 324 = 31.79012345679% (32%)

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS THE PLAN HAS A PROTECTED PENSION AGE).

THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP, WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE.

YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

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