What is the gender pension gap?

Lifelong inequalities and women’s pensions

Retirement is often seen as a part of women’s lives that is far off in future, especially when the State Pension age (SPA) is projected to keep rising beyond 68, with these changes rumoured to be accelerated by as early as 2035. This is despite Scottish data showing that life expectancy is falling alongside similar figures for the UK, which show a decrease in life expectancy, in recent years. Healthy life expectancy figures have also seen a decline in Scotland, which impacts people’s ability to remain in the labour market. As women, on average, live longer than men, it’s especially important to consider the circumstances that will constrain women’s ability to plan for, and enjoy, their years in retirement.

However, the gender pension gap is a systemic issue. The gender pension gap (here given in terms of savings) means that women are currently retiring with £123,000 less than men. Further, a woman who is currently aged 25 is set to retire with £100,000 less than a man. The gender pension gap is also one of the main causes of female pensioner poverty, with single female pensioners, and racialised minority women pensioners at much higher risk than pensioners in couples and pensioners who are white.

Unlike the gender pay gap, there is no set definition or official measure of the gender pension gap in public and policy discussions. Overall, it’s generally understood to mean the different outcomes in retirement between men and women. The main difference is that, in some cases, the gap is calculated by looking at the difference in income between men and women in retirement. Other measures may look at the difference in wealth between men and women in retirement instead.

The drivers of the gender pay gap overlap with the drivers of the gender pension gap. There remain however, enduring structural barriers within the pension system itself that can inadvertently affect women’s pension outcomes. We know that what happens during a woman’s career is directly linked to her future pension pot. Responsibility for unpaid care shapes women’s working lives, impacting their ability to earn and to save, while enabling men to maintain better paid, uninterrupted careers.

Gender inequality in the pension system

The pension system itself is highly gendered, reflecting the traditional male working pattern it was built on post-war. Both state and private pensions were designed to reflect the ‘male breadwinner model’ which benefits men and places women at a significant disadvantage. For example, gaps in women’s employment due to caring responsibilities mean they will often not earn enough to make National Insurance contributions and therefore not build up their entitlement to a state pension at the same rate as men, who are more likely to work full-time.

Even now reforms to the state pension system have failed to consider gender, for example auto-enrolment excludes the lowest paid part-time workers, who are more likely to be women.

Continuing crises and the impact on women

The lasting impact of over a decade of austerity means that women are far more likely to have suffered significant hardship, with less capacity to absorb the impact of recurrent crises and increases in the cost of living.

Covid-19 exposed many of the entrenched inequalities that have seen women generally placed at an economic disadvantage. Women’s labour market participation was severely affected, with women more likely to be:

• in the sectors that were shut down, such as retail and hospitality;
• furloughed; and
• made redundant.

During this time, women were also more likely to be bearing the brunt of increased household labour and care, including supervising home-schooling.

The cost of living crisis has exacerbated poverty and financial precarity. More women report that they have cut back on household essentials, including basic clothing, transport, often skipping meals to help provide for their families, and with a greater reliance on foodbanks.

Evidence from Scottish Widows reveals that the crisis is having a direct impact on retirement savings, with 16% of women cutting back on their retirement savings to cope with rising living costs . The figures were similar for men, however women were already less likely to have been saving for retirement due to the adverse gendered consequences of past crises.

Unequal distribution of unpaid care

As highlighted above, there remains an unequal gender distribution of care, which typically falls on women’s shoulders. This is a key contributor to women’s pension inequality.

Women are more likely to have unpaid caring responsibilities for children and other relatives with caring needs, which drives the high levels of women working part-time. Women are overrepresented in low paid, part-time work and, simply put, lower wages mean lower pension contributions.

Caring responsibilities also often mean that women withdraw from the labour market completely, and these interruptions to employment have a huge impact on their pension contributions. Women therefore have less time to build up a good pension for retirement.

A necessary step in addressing the gender pension gap is better support for childcare. The high cost and lack of availability of childcare that meets working women’s needs restricts women’s choices in employment and limits their ability to save for retirement.

Divorce and separation

The need for women to accumulate their own independent pension is vital for women’s safety and economic wellbeing. In opposite-sex relationships, women are more likely than their male partner to take time off to care for children. This results in gaps in their employment and sees them funnelled into low-paid work, which reduces their ability to save for retirement. Meanwhile, men face less interruption in their careers, with better opportunities to progress and the ability to save more.

Research from Now: Pensions, shows that when divorce happens within opposite-sex relationships, and women reach retirement age, they leave work with only 12% of the pension wealth of men. This represents only £26,100 compared to a staggering £205,800 for men. Pensions are often not considered during the separation process – just 12% of divorces include a division in pension. Women are therefore effectively penalised for their caring roles.

Demographic factors

On average, women live 3.7 years longer than men, but are also more likely to need care later in life. This means they need more savings in their retirement, and to be able to live off their retirement savings for longer. Scottish Widows estimates that, on average, women would need £85,000 more in their retirement savings to ensure financial stability and a quality of life comparable to their male counterparts.

This also means the rise in the SPA does not produce gender neutral outcomes. Women are more likely to exit the labour market early, before reaching retirement age, often due to caring responsibilities or for health reasons. The increase in SPA therefore means that women will be left with an even larger gap in income to fill. Research focusing on the increase in the SPA from 60 to 66, for women born after March 1950, shows a detrimental impact of the reform on women from lower socioeconomic groups, with widening health disparities, an increase in self-reported clinical depression and a negative impact on their physical health. The WASPI (Women Against State Pension Inequality) Campaign are among groups such as BackTo60 and We Paid In You Pay Out, who have been vocal in highlighting the injustice that significant changes to the SPA were made without providing sufficient notice to those who would be most affected: women. Rather than opposing the equalisation itself, a shared concern of these groups is that the government had accelerated the timetable but failed to notify the 1950s-born women, who would be severely impacted by these changes.

Women’s divergent experiences of pension inequality

It’s also vital to recognise that women’s experiences vary, and different groups of women will face different and multiple barriers which will contribute to the gender pension gap.

Those who are most likely to be from under-pensioned groups include racially minoritised women, disabled women, carers and single mothers. In addition, COVID-19 has made it more likely that carers will experience potentially damaging effects on their pension contributions as they have found it more challenging to maintain employment.

Furthermore, women from some racially minoritised groups are more likely to cite they had no pension as a source of income in their retirement, but using cash savings instead, placing them at greater financial risk due to the high levels of inflation. Single mothers are one of the groups hardest hit by the increase in the cost-of-living and are typically the least prepared for retirement, while also being unable to rely on other forms of retirement income such as investments. This places them at considerable vulnerability now and in retirement.

Change is needed now.

Wide-ranging reform to the pension system is necessary if it is to work for women. Likewise, there are many steps government and employers must take to address both the gender pension gap and gender pay gap.

We need a childcare system that ensures provision is flexible, accessible and affordable to tackle barriers to good quality work for women, increasing their ability to save for retirement. Pension rights must be a compulsory part of divorce proceedings to ensure women’s economic wellbeing and safety. Finally, the pensions system itself need radical change to reflect the realities of working life for women.

Urgent action is needed from government and employers to mitigate the impact of pension poverty experienced by older women now and, to challenge the current drivers of the gender pension gap for future generations of women.

Positive shifts, persistent problems: an assessment of five years of employer gender pay gap reporting

It’s now five years since the introduction of gender pay gap reporting for large private and third sector organisations. We’ve published our latest employer assessment today, which looks at the reports of 50% of Scottish employers covered by the reporting regulations. It presents an in-depth analysis of reporting in 2021 and 2022, and compares this with previous reporting to identify if progress is being made.

The reporting regulations were introduced following a UK Government initiative – Think, Act, Report – which sought to encourage employers to report their pay gap voluntarily. Of almost 300 employers who signed up, only seven reported their pay gap, demonstrating the need for mandatory reporting.

In 2018, organisations published their first reports. In this year, and every year employers have reported since, Close the Gap has completed an assessment of the extent and standard of reporting, and whether it is creating change for women in the workplace in Scotland.

Despite some positive shifts, there remain persistent problems. More employers are taking action, but the majority of that action remains small-scale and untargeted, which is simply not enough. Too many employers point to gender inequality at a labour market and society level as a reason they’re unable to create change in their organisations, instead of taking action. We found some great examples of employer action that are included in the report, and prove that progress is possible.

First Bus (FirstGroup) has taken long-term action to attract more women and has doubled its female workforce since 2017. A significant contributor to this has been a trial of part-time bus driver roles (15-25 hrs per week) which has resulted in 50% of new hires being women, up from 2%.

Natural Power have introduced a scheme to contribute to the cost of childcare for employees returning to work after maternity or parental leave, which pays returners a £400 bonus payment per month for 12 months.

Calmac Ferries has established a working group to identify barriers to working at sea faced by women, including around caring responsibilities and returning from maternity leave. They have held focus groups with female employees to understand their experiences and identify how they can improve practices.

Despite this positive change, we’re still a long way from seeing the level of consistency and commitment needed to tackle women’s inequality in the workplace.

The key findings of the assessment are as follows:

• There has been little progress made in narrowing the gender pay gap: the average pay gap of employers assessed remains stubbornly at 12%. In 2022, the vast majority of employers (80%) have a gender pay gap in favour of men, up from 78% in 2021.
• The prevalence of bonus gaps has not changed, however the average bonus gap itself has narrowed significantly from 33% to 11%. It’s possible that bonuses may be generally lower in 2022, resulting in a drop in men’s bonus pay with a smaller or no drop in women’s bonus pay. It’s also possible that organisations reduced some of their highest bonuses, which are more likely to be paid to men, due to economic uncertainty arising from the pandemic. However, as most employers did not describe any changes in their approach to bonuses, it was not possible to identify why this gap has narrowed.
• In 2021 there were high pay gaps of up to 60% in male-dominated sectors such as sport, construction, finance and manufacturing, and up to 80% in the same sectors in 2022. The average pay gap in the most male-dominated organisations in 2022 was 24%. This is double the headline average of 12%, and an increase from 21% in 2021.
• There remain very high bonus gaps of up to 100% in male-dominated sectors such as sport, manufacturing, wholesale and retail trade, and transport and storage. This aligns with existing evidence on the causes of the gender pay gap. In the wider labour market female-dominated organisations generally do not have high pay gaps.
• Since 2018 there has been a significant increase in the proportion of employers publishing a narrative report alongside their pay gap information, up from 30% in 2018 to 48% in 2022. This is positive, as publishing data alone will not lead to change. However, the vast majority of analysis (76%) was found to be of poor quality, indicating employers may still need to build their understanding of how to use their data.
• The proportion of employers that have committed to action to tackle their pay gap has almost doubled from around one in five (19%) in 2018 to more than a third (36%) in 2022. Encouragingly that the quality of actions has also increased with just over a fifth (21%) considered satisfactory and another fifth (21%) considered good. There has also been a doubling in the proportion of employers setting targets, albeit from a very low base, from 5% in 2018 to 11% in 2022.

When the gender pay gap reporting regulations were first introduced, Close the Gap highlighted a fundamental weakness: they require employers to report their data, but they do not mandate them to take action. The UK Government asserted that organisations would be motivated to take action voluntarily by their pay gap data, despite the results of the Think, Act, Report initiative indicating otherwise. It is clear that this theory of change is flawed and is simply sustaining the gender pay gap and women’s inequality at work.

Extensive evidence from Close the Gap, along with international evidence on pay gap reporting regimes, shows that reporting alone does not create change. In 2023, we’re calling again for a strengthening of gender pay gap reporting regulations to require organisations to use their data to develop and publish an action plan, and to report on progress against it. If the regulations remain the same, it also means more of the same old gender inequality for women at work.

We're hiring!

We’re looking for an enthusiastic person to lead on Close the Gap’s parliamentary work, engaging with parliamentarians and committees, and influencing legislative processes. You’ll be working in our small, busy team to influence policy around the causes of the gender pay gap by producing policy analysis, briefings and advocacy materials, and building and managing relationships with key stakeholders. Committed to an intersectional approach to women’s labour market equality, you’ll also be supporting a research project on disabled women’s experiences of work.

Purpose

To influence policy around women’s labour market equality by developing policy reports, briefings and consultation responses, and participating in strategic level policy work. To deliver Close the Gap’s parliamentary engagement work, influence parliamentary processes, and shape Close the Gap’s approach to progressing its policy advocacy priorities.

Role information

Hours: 34 hours per week
Salary: £35,050
Pension: 10% employer contribution
Holiday entitlement: 28 days of annual leave and 13 public holidays
Location: 166 Buchanan Street, Glasgow, G1 2LW

Close the Gap is operating a hybrid working model, with the option to work from the Buchanan Street office or from desk space in Edinburgh.

Responsible to: Executive Director

The post is fixed term, funded until 30 September 2024 with a potential extension, depending on funding.

Close the Gap values diversity in our workforce, and recognise the benefits it brings to the organisation. We therefore particularly encourage applications from racially minoritised people and disabled people who are currently under-represented in the organisation.

We’re strongly committed to enabling flexible working for staff, and will consider all options to enable applicants to work flexibly.

Application notes

Electronic applications must be submitted using our online application form which you can find on our website at https://www.closethegap.org.uk/jobs/. If you are unable to use an online application process please contact us at info@closethegap.org.uk

The deadline for applications is Sunday 29 January 2023.

You will be notified by Thursday 9 February 2023 if you have been selected for interview.

It is anticipated that the interviews will take place remotely during the week commencing 20 February 2023.

New employer guidance on taking an anti-racist approach to tackling gender inequality in the workplace.

Racism and sexism are the causes of the inequality and discrimination that racially minoritised women face in their everyday lives. It’s no different in the workplace.

Gender and racial inequality at work are issues for all employers, irrespective of the diversity of their workforce. Racially minoritised women face prejudice and discrimination in the labour market every day. It’s time to act.

It’s not enough to think about gender inequality or racial inequality on their own – you need to understand how these intersect to create double discrimination for racially minoritised women.

By tackling racism and gender inequality together, you’ll also be contributing towards greater equality for racially minoritised people and women more widely in your workplace. Taking an intersectional approach is necessary to advance equality for all groups that face discrimination.

Our new guidance

Close the Gap has developed new guidance for employers on taking an anti-racist approach to tackling women’s workplace inequality. It contains information on:

• the intersection of racism and sexism in the workplace
• the barriers faced by racially minoritised women
• how to take an anti-racist approach to tackling gender inequality in your organisation

There’s also a suite of quick-read resources to enable you to:

• gather and use data to better understand your organisation
• make sure your key people know what their role is, and are supported to play their part
• take positive action to increase diversity at all levels of your organisation
• build a tailored action plan to create real change

Many employers want to take action but may not be sure where to start. Our guidance can help.

We held an online webinar to launch the guidance, where we heard from experts on gender sensitive anti-racist practice and taking an intersectional approach. The keynote address was delivered by the Minister for Just Transition, Employment and Fair Work. You can watch the webinar here.

What employers need to know about racism and sexism at work.

Racially minoritised women still face deeply rooted prejudices, racism and sexism in their lives, which contributes to their inequality at work. While racism and sexism each exist on their own, they also change where they occur in combination. This produces specific inequalities for racially minoritised women, known as intersectional inequalities.

This combination of racist and sexist attitudes and behaviours, and in-built bias in employment policies and processes, creates intersectional inequalities for women in the workplace. It isn’t just about isolated incidents of bullying and harassment between individuals, but a part of a wider problem with workplace culture, and intersectional inequality in the workplace.

A majority of racially minoritised women have experienced a combination of racism and sexism at work. Just because you haven’t received a report of racist and/or sexist behaviour or discrimination doesn’t mean it hasn’t happened in your workplace. Racism and sexism are embedded in workplace reporting systems, creating barriers to reporting. Most women won’t report incidents because they don’t think their employer will take the matter seriously, or they fear a backlash for doing so.

What employers can do?

One of the first things you need to do is acknowledge that racism, sexism and intersectional inequality are issues for all employers – regardless of whether you’ve had a report, or how diverse your workforce is. A willingness to be objective and honest about the challenges you face is key.

You can show leadership by openly acknowledging that employers have a responsibility to challenge racism and sexism, and their interaction, at work and communicating to staff the actions you will take to do this.

You can build trust by seeking honest feedback and reflections from staff, and demonstrating that you are taking action.

You can also build trust by showing that you’re willing to be accountable. This means following through with meaningful actions and progress updates on your work to deliver equality for women in your organisation.

Because racially minoritised women face specific inequalities, you can’t just combine work to tackle racism & racial inequality with work to tackle sexism & gender inequality. You need to work to understand and address the specific challenges facing racially minoritised women if all racially minoritised people, and all women, are to obtain equality. Our guidance will help you do this.

It's important to recognise that action to tackle incidents of discrimination is only part of the solution. You can use our guidance to take a gender sensitive anti-racist approach to reviewing your workplace culture and employment practices.

This means proactively identifying and tackling gender inequality and racism, which involves taking an objective view of your organisation and being honest about the challenges you face. This is what gender sensitive anti-racist practice means.

Create change in your workplace and communities

Change doesn’t happen overnight. But with commitment and sustained effort you can create real change for women, and your organisation, and become a sector leader in equality, diversity and inclusion. You’ll be able to attract and retain the best talent, making your organisation more productive, more innovative and more profitable. You’ll also demonstrate to your workforce that you’re committed to equality, diversity and inclusion, building trust and loyalty in your customer or service user base.

Employers have the ability to take meaningful action and create change for women in your organisation and in the communities you operate in. You also have a responsibility to do so.

Download our guidance now and learn how you can build anti-racist leadership on gender equality.

Guidance for employers on taking an anti-racist approach to tackling women’s workplace inequality

Supporting resources:

• Core actions for key people
• Capacity building for key roles
• Using data
• Level the playing field
• Key messages
• Action plan checklist

Watch our webinar and hear from experts on gender sensitive anti-racist practice and taking an intersectional approach.