A white paper commissioned by Federated Hermes, conducted by City Hive to understand the key reasons for the current gender pension gap and what can be done about it.

It’s hard to think about the future when the present has so many challenges, but many women are sleepwalking into financial insecurity in their retirement and we as an industry are doing very little collectively about it.

The Gender Pension Gap in the UK is approximately 40%. In real terms, that means women, on average, will retire on a private pension pot of £51,100 by the time they hit their 60s compared to £156,500 for the average man according to data from the Pensions Policy Institute(PPI). 

This is just one facet of the Gender Pension Gap. The Gap refers to the discrepancy in private pension provision for men and women as well as differences in state pension entitlements, a silent tragedy that means women are likely to find themselves in a financially constrained retirement – and it all could be avoided with more focus from our industry on a potentially massive market. 

While this gap is known about, it is often explained away by motherhood causing women to leave the workforce or work part-time. It equates lower pay for women to choices made by women without recognising the structural causes of this imbalance in caring responsibilities and the compound impact from the Gender Pay Gap.

It largely ignores policy constraints that lead to, for example, the generation of women who paid the ‘married woman’s stamp’ at a reduced rate that resulted in limited pension entitlements that were not made clear at the time, or the WASPI women who saw their retirement age shifted without consultation or recompense. It glosses over the increased number of women in precarious employment, under the tax threshold or self-employed, leading to gaps in their contributions. 

Meanwhile, the onus is being placed on women to sort out the gap by taking action to plan for their retirement. This is despite research that has exposed the difficult choices that women face when deciding what to do with their income, such as that raised in the report The Financial Power of Women by Fidelity FundsNetwork. Given the need to spend money on children’s clothes or food today, it’s not surprising that mum’s pension pot isn’t given a second thought – something that employers might consider when thinking about the wellness checks they provide.  

Above all, the way pensions are marketed and provided unquestioningly goes along with the idea of the ‘default man’, including in the FCA’s own guidance that refers to ‘he’ throughout. Women don’t feel catered to because they aren’t being considered as a prize. There are several implications for this. One is noted in the 30% Club’s report Are You Missing Millions, every business should have a gender lens or risk missing out on female capital spending. 

But the time bomb can be seen in Fidelity’s latest research that worryingly notes only 12% of young women are seeking financial advice. Research by the PPI highlighted that 1.2 million women in their 50s have no private pension at all (50% higher than for men in the same age bracket). What will that figure look like in 20 years? And why aren’t we seizing the opportunity presented by this untapped market? 

If the industry fails to act they will be fair game for disruptors that are willing to listen to their needs. We know that women are receptive to responsible and sustainable investment approaches, and therefore an ideal market for emerging platforms such as the newly launched social investment platform, the Big Exchange. We could know more if we put efforts into finding out what women want and need to plan for a more prosperous retirement. 

It is our social responsibility to ensure we look at the role that our industry has played and what action we need to take to close the Gender Pension (and Investment) Gap, starting with the regulator and how policy is framed and set, down to how we sell our services and the type of advice we give.  This issue firmly sits at our door and any organisations who wake up to closing it will reap the rewards.