Pension Blog Series: Episode 3 – Gender pensions gap

In Episode 3 of our new Pensions blog series, we look at the gender pensions gap, which may be adversely affected in the long term by the impact of Covid-19.

Research by Aegon shows that 15 per cent of women are likely to decrease their pension contributions over the short term, compared to 10 per cent of men. The research also shows that during any future economic recovery, it is likely that men will be more likely to take advantage of any improvement in the economy by investing more into their pensions, whilst it may be harder for many women as they tend to have been employed in the sectors hit the hardest during the pandemic (salons, hospitality & retail).

The People’s Pension director of policy, Phil Brown, explains:

“The main cause of the growing gender pensions gap is that many women have to work fewer hours and for less money after they have had children. As pensions are tied to pay, they end up with a smaller pension as a result.”

The unique retirement saving challenges for those aged 50-59

To be aged 50-something today is to be continually caught in the middle – the last of the baby boomers or the first of the Generation Xers, sandwiched between adult children and elderly parents to support. Several decades since you started work, but with probably more than 15 years to go until retirement. The last to potentially have defined benefit (DB) pension savings (outside of public sector work) while also likely to be amongst the first to be saving for retirement under auto-enrolment rules.

The decision about how to access a pension pot is probably more involved than it has ever been. Historically, annuities were the most common choice for those accessing their pension and will have proved a sensible approach for many – especially when annuity rates were far more attractive than they are currently. In recent years several factors have tipped the balance against annuities:

  • The arrival of pension freedoms in 2015 has meant consumers now have a far greater choice of how to access their pensions
  • A combination of falling gilt yields and increasing longevity have sent annuity rates crashing to record lows, hence you get a lot less income from your pension fund #

Based on a £100,000 fund, aged 65’ non-increasing, single life pension (source: sharing

  • 2008: annuity available £7,908 per annum
  • 2020: annuity available £4,939 per annum

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Other episodes in this series

Episode 1 – The impact of COVID-19 on pensions
Episode 2 – Reversing damage to long-term retirement plans caused by reducing or stopping pension premiums
Episode 4 – Why are more people turning to their pensions in the crisis?
Episode 5 – Lump sum losses: the tax hit of large pension withdrawals

The contents of this article are for information only and should not be seen as advice or recommendation to act. Always seek financial advice before taking action in respect of your pension planning.