A] Prelude
For more information on pension systems, risk and coverage, feel free to visit our dedicated webpages:
https://expatpensionholland.nl/uk-expat-pensions
https://expatpensionholland.nl/global-pillars-systems
https://expatpensionholland.nl/global-investments-risks-0
https://expatpensionholland.nl/global-social-security-coverage
For even more information feel free to visit the following external sites:
https://www.weforum.org/stories/2024/10/what-is-the-gender-pensions-gap-and-what-can-we-do-about-it/
https://www.legalandgeneral.com/retirement/pensions/guides/gender-pension-gap/
https://www.eiopa.europa.eu/impact-social-and-behavioural-aspects-gender-pension-gap-europe-2024-06-26_en
B] The Issue In The UK
Women have been issued a pension warning as new research revealed they risk emptying their pension pots 14 years too soon. The research, released ahead of International Women’s Day (Saturday March 8) indicated that, based on current pension withdrawal rates, women could empty their private pension savings by the age of 73.
C] The Details
Legal & General, which published the research, said that, with the average life expectancy of a 60-year-old woman in the UK sitting at 87, some female retirees could be left with a 14-year shortfall between their private pension funds running out and the end of their lives.
With the average life expectancy of a 60-year-old man in the UK at 85, men could have two years of retirement without any leftover private pension savings. Katharine Photiou of L&G, said that, after decades of saving, the ability to withdraw money from a pension can create a “lottery effect”.
But she cautioned: “What seems like financial freedom now might turn into uncertainty later.” The modelling used Office for National Statistics (ONS) life expectancy calculations as well as an Opinium survey among 3,000 people aged over 50 carried out in December 2024.
The calculations made assumptions about inflation and investment returns and that people would start making regular withdrawals when they turned 67 until their private pension pot ran out. It was also assumed that people had no other sources of income, such as property wealth or a guaranteed pension income based on someone’s salary. People will also be entitled to the state pension, the size of which depends on factors such as national insurance (NI) contributions.
D] The Consequences
The research indicated that women are typically withdrawing less from their pension than men but have less money saved into it to start with at £40,000 versus £87,500 for men. Of those receiving income from an income drawdown pension, women are receiving £625 per month on average, compared with £875 for men.
However, women were more likely than men to have increased their withdrawal rate since they first started making withdrawals. More than a quarter (27%) of women making withdrawals had increased their withdrawal rate, compared with less than a fifth (19%) of men.
The research was released as a survey of 2,000 people for savings and investment app Moneybox, which found that nearly one in 10 (9%) women plan to start investing this year, while 13% intend to increase their investments. Investing more was found to be the top financial goal among women aged 25 to 34 years old, the survey by OnePoll found.
More than half (59%) of women who invested last year did so to grow wealth, 47% wanted to secure a comfortable retirement, and 34% were aiming to provide for family in future. Nearly a fifth (18%) of women who invested did so because they enjoyed it and treated it like a hobby.
E] The Differences
London and Northern Ireland had the highest rates of female first-time investors last year, the research indicated. Lower, part-time salaries and caring responsibilities can be obstacles to some women – and some men – being able to save adequately for later life. Another study found that over half (59%) of parents have taken on new debt to afford maternity or shared parental leave, borrowing an average of £2,658. A quarter (25%) of these parents said they were still in debt when their child had started school.
Women were less likely than men taking parental leave to say they had moved to a job with enhanced parental benefits. A fifth (21%) of men taking shared parental leave had switched jobs to an employer offering enhanced benefits, compared with 9% of women taking maternity leave, the OnePoll survey of 2,000 people across the UK found.
F] Gender Gap From Canadian Perspective
Women in the workforce have made significant strides in recent decades: the gender wage gap is shrinking and more women hold a growing share of senior leadership positions at Canadian companies. But there’s another gap that should get more attention – the gender pension gap.
Despite advancements made in the workplace, according to Stats Canada, women still face an annual income gap of 29%. And what’s more worrisome is that we are now seeing the impact the wage gap is having on women in retirement. We’ve conducted research at the Healthcare of Ontario Pension Plan (HOOPP) that shows women are greatly disadvantaged in their ability to save for retirement for a number of reasons.
Although more women than men are covered by a registered pension plan, they receive an average of 17% less income in retirement through workplace pension payments, registered retirement savings plans (RRSPs), Old Age Security, Canada Pension Plan/Quebec Pension Plan (CPP/QPP) and other government benefits. This means women earn 83% of retirement income for every dollar paid to men. Even though the wage gap has been closing over time, the pension gap has grown by 2% since 1976.
The pension gap is tied to the wage gap, which reduces women’s overall contributions into public and workplace pension plans and limits their personal savings. Aside from affecting their overall capacity to save, the wage gap also ensures women, on average, have less RRSP contribution room than men. This can have serious consequences because RRSPs are an essential retirement savings tool for many Canadians.
The wage gap is compounded by other social factors. Women are more likely than men to take time off work to have children or look after their families. Those same responsibilities contribute to the fact that women are twice as likely as men to work part-time, further reducing their ability to save for retirement.
These financial factors don’t only affect women’s retirements; they are also more likely to have less money in general. The 2024 Canadian Retirement Survey by HOOPP found that nearly half of Canadian women had less than $5,000 in savings – in fact, 28% of women had no money saved at all. Women were also significantly more likely to say they didn’t have enough money coming in to set some aside in savings.
Statistics Canada data from 2020 showed about 200,000 more women than men aged 65 and older were living below Canada’s low-income cut-off. For a single person living in a city the size of Toronto, that was an annual income of less than $26,621 before tax, or less than $33,142 for a couple.
These problems extend beyond the pocketbook: increasingly research findings show that wage and pension gaps increase the likelihood of women experiencing financial stress, which in turn can put them at greater risk of developing health problems like anxiety, depression and physical conditions like heart disease.
Earlier this year, HOOPP released a report called The Health Impacts of a Pension. It found that women are 7% more financially stressed than men and experience 6%lower financial well-being. But the research also showed that having a defined benefit (DB) pension plan decreases financial stress and increases well-being for Canadian workers.
It will take time, effort and collaboration across the public and private sectors to address the pension gap. Increasing the number of women in leadership positions at Canadian companies can help: HOOPP’s 2024 Canadian Employer Pension Survey found that Canadian employers with at least one woman at the executive level were nearly 20% more likely than employers with no female executives to agree that eliminating the gender pay and pension gaps is important to the social and economic well-being of Canadians.
Another key step is for employers to offer workplace pensions to their employees if they don’t already do so. Improving access to workplace pensions would benefit all Canadians – especially women working in the private sector, who are much less likely to be covered by a workplace pension.