Gender pension gap: why women save less - and why that’s changing dramatically- Part 1
One issue that has attracted growing attention in recent years is the “gender pension gap” – the fact that on average, women have lower private pension wealth and lower income in retirement than men. But before rushing to conclusions about how to “fix” this, it is crucial to understand what lies behind any pension differences between men and women.
There are three main potential drivers behind this phenomenon:
- Different labour market experiences: the “gender pay gap”, and the fact that men have longer paid working lives than women;
- Different investment strategies: when it comes to defined contribution pensions, men choose to invest in portfolios with a higher expected rate of return.
- Different saving rates: as we investigate below, men and women may also differ in how likely they are to be offered a pension in their job, or tend to work for employers that contribute more or less to a pension, or tend to make different contributions themselves.
Importantly, the role of these potential drivers will have changed over time for various reasons. Mothers have increasingly participated in the labour market over the years, for example. Final salary pensions have been reformed to career average schemes, which in particular reduced the generosity for long stayers and those with stronger pay growth, affecting men more than women. Also, automatic enrolment has been introduced for workplace pensions, which affected everyone’s participation in them.
Gaps in pension income today may therefore reflect labour markets and pension arrangements from many years ago, and the gap in pension income for current working-age individuals may be quite different when they reach retirement. In an ongoing programme of work at the Institute for Fiscal Studies, funded by the Nuffield Foundation, we are examining in detail differences in pension saving rates between men and women that will contribute to a future “gender pension gap” for today’s working age individuals.
SOURCE: ‘The Conversation’/Internet