Why are women’s pensions still less than men’s?

In November 2018 the age that men and women collect their state pensions was equalised. Both are now eligible from the age of 65. But coupled with private pensions, the sexes are far from financially equal.

In fact, women’s pensions have fallen short of men’s for many years.

In general life, men and women are now equal. That’s the theory. From high-profile jobs to sports stars, looking after kids and sitting in board rooms – it’s supposedly getting fairer. Tasks and roles are shared.

But with pensions – there is still much work to be done.

Back to the state pension for a moment. The monetary amount that people collect might be the same (dependent on National Insurance contributions), but reaching this point has not been so fair and balanced.

For a long time women could retire early and draw state pensions from 60 years of age. When the Government increased the pension age for older women they were, according to campaigners (like Women Against State Pension Inequality), given little time to prepare and adjust.

The retirement plans for many women “have been shattered with devastating consequences” as far as WASPI is concerned. They have now finished work and have little or no opportunity to top up pensions.

For the worst affected, they must continue working much later than planned.

What factors have affected women’s pensions?

The fact that women accumulate less in state and private pension pots is no secret, but why does this happen? There are a number of factors:

  • Historically, women have paid less into pensions because they take career breaks – usually to have children.
  • Some women who worked in low paid, part-time jobs didn’t qualify to earn NI credits.
  • Complicated rules about Child Benefit payments for high-earning families have seen women miss out on NI credits.
  • Because of career breaks and other factors, women still earn less across lifetime earnings.
  • Through lack of information or poor advice,  many women fail to ensure that pensions are shared when divorce happens. They are then left with much less than men during retirement.

There are other reasons, but it’s clear that the odds have been stacked against women for some time. Earning less, and over fewer years at work, has meant that private and state pensions accumulated will be lower when women reach the new retirement age.

Women make fewer pensions decisions

Until the 1970s, it was common to see women stay at home looking after children and maintaining the home. This involved running household budgets, but rarely playing an active role in major financial decisions.

This started to change in the 1980s, and certainly in the 1990s and beyond. Things became much more equal. However, the financial decision-making process in many households remained the preserve of men.

This must change. Women must take control of their financial destinies – and much sooner than men because of the factors listed above.

While biology still determines that women give birth to children, the time available to work, earn, save and invest is reduced. That means planning early is essential. Starting pensions as soon as possible must become a priority.

Crucially, women must seize the initiative.

Redressing the pension imbalance

Financial advisers are well placed to outline what financial targets need to be reached during working life – either with or without career breaks.

Helping to redress the pension imbalance is something that Logic Wealth Planning is keen to tackle.

For too long we have seen fewer women requesting information or taking advice. Men still seem to take the lead when it comes to household finances. That certainly seems to be true when talking about the older generation, people already in their 60s and above.

While attitudes are changing, slowly, the worse outcome is seeing women lose their husband during retirement and then struggle to manage the necessary finances.

This tends to be because they have never had to deal with savings, investments and pensions. We’d like to see that change.

For jargon-free, independent financial advice – for men AND women – come and talk to our friendly team of advisers.

Call us on 0808 1234 321 or email info@logic-wp.com and we’ll do the rest.