As corporate issues go, gender pay continues to pick up growing attention and concern. But new data suggests the size of pension gaps may be far greater—and harder to resolve.
According to the latest data from the UK government’s Department for Work and Pensions Family Resources Survey, British women will receive pension payments that are 40% lower than those of men. The difference means women get around £7,000 ($8,470) less in pension payments a year than do men. And the finding isn’t unique to Britain, with the European Union finding similar results.
The pension gap is more than double the so-called gender pay gap, where men typically get paid more than women. That gap was pegged at 18% for the United Kingdom in 2017. To be sure, companies aren’t providing lower pensions for women on a percent basis. But experts say women follow career paths that differ in three main ways from men, which under the current system result in much lower pensions for women. “It’s a triple whammy,” says Benjamin Frost, reward product expert with Korn Ferry.
Women tend to earn less money than men. Given that pensions are usually a function of pay, then those people making less will accrue lower pensions. Women also tend to quit full-time jobs to care for children far more than men. A mere 34% of working-age British women with children up to 18 years old have full-time jobs. Approximately two in five women age 16 to 64 leave work entirely to look after their family. And when they aren’t doing paid work, women accrue nothing toward their pension. Likewise, when working part-time, they are accumulating less than they would otherwise.
Another difference is that lower-paid individuals tend to enroll in pensions at a far lower rate than do higher earners, according to government data. For many women, that’s because they more often get employed in part-time and temporary positions than men. “It’s like ‘why bother when it’s a temp thing,’” says Frost.
Fixing the issues won’t be easy, most agree. But smart companies are helping fix the matter by giving employees a nudge through autoenrollment in company pension plans, experts say. Some are also offering more flexible working arrangements for women. “Show role models that are doing that and that it isn’t detrimental to their career,” says Mary Macleod, senior client partner of Korn Ferry’s Board and CEO Services practice and head of the firm’s Government and Public Enterprise practice.
Pension education for all workers is useful, too. In particular, employees of both genders need to understand better how pensions work—especially how they accrue over time and how the investment will likely grow. “What they haven’t thought about is the impact of time-off for childcare,” says Macleod. In other words, they don’t realize that an early career break can come at a large cost in terms of lower pension benefits. “Organizations can be offering more pension advice as a duty of care; good companies are doing that already.”