An inadequate pension system for disabled women

Women have historically been disadvantaged by the pension system in comparison to their male counterparts. Since its inception, it has only placed value on the ‘male working pattern’ of working full-time hours with an uninterrupted working history. However, this is far from the reality of women’s lives, in particular disabled women’s lives.

There’s no recognition of the invaluable contributions made by women to the economy, as the pension system doesn’t consider the high levels of domestic labour and unpaid care, carried out overwhelmingly by women. The current pension system therefore fails to recognise the complex nature of the gender pension gap, the drivers of this, and the impact on disabled women’s lives.

As part of Challenge Poverty Week, it’s an opportune time to think about how a lifetime of gendered inequality in the labour market drives higher levels of female pensioner poverty. This is particularly the case for disabled women who face intersecting inequalities, which means they’re more likely to experience poverty in work and in retirement. This is the second in a series of blogs about the gender pension gap and the differential outcomes for women surrounding inequality and poverty.

The gender pay gap and the long-term cost to women

As our report ‘The Gender Penalty’ details, the drivers of the gender pay gap are complex and interrelated. As the key indicator of gender equality, it represents the divergent experiences of men and women in employment, education, skills acquisition, care, and domestic labour. The structural barriers to women’s equal labour market participation are far-ranging and deep-rooted, such as occupational segregation and the undervaluation of ‘women’s work’, meaning there is no single solution to tackle the gender pay gap and women’s pension inequality.

Our first blog on the gender pension gap, ‘What is the gender pension gap?’ sets out the clear connection between women’s labour market inequality and the gender pension gap. A more nuanced understanding of the drivers of the gender pension gap is needed to understand how this contributes to women’s higher levels of poverty in retirement. There’s a direct link between earning less and saving less that impacts women’s ability to build their pension pot. On average, women have less savings and access to occupational pensions than men. However, due to multiple barriers to participation in the labour market and routes for progression, disabled women and racially minoritised women are more likely to be unemployed, under-employed and experience higher pay gaps. Analysis from TUC reveals that disabled women face the biggest pay gap. The figures show that disabled men are paid £7,144 a year more than disabled women. Research has also shown that the difference in pay between disabled women and non-disabled women varies considerably. This can range from 4.3% to 18.9% depending on the type of impairment.

Disabled women are among the under-pensioned groups who find it more difficult to achieve an adequate income in later life. Racially minoritised women, divorced women, as well as women who have been lone parents at some point in their lives, unpaid carers, and women who are self-employed are also at a greater risk of inequalities associated with lower retirement incomes. The gendered division of care and the likelihood of interrupted working histories, as well as a result of divorce, are major factors in women’s lower lifetime contributions to pensions.

Analysis from Age UK showed that in less than a decade, the proportion of female pensioners in the UK living in poverty had risen by 6%, meaning one woman in every five is now living ‘below the breadline’. This is despite the number of female pensioners falling after the state pension age was increased, which disadvantaged many older women. So, while there are fewer female pensioners, the number of women living in poverty has increased in this time. This signals that the pension system is insufficient as a source of income for women of pensionable age.

Pensions are core to retirement preparation yet most people (58%) are unsure about their likely state pension entitlements and what they will receive. Research from Scottish Widows showed that while both men and women expect to be able to rely on a state pension, there are disparities in their expectations of retirement with 61% of women who have concerns about running out of money in retirement compared to 52% of men.

Research has also found that women who were unaware of the raised state pension age were more likely to experience the news as a shock, exacerbating the negative impact on their mental and physical health with a detrimental impact on women from lower routine and manual social classes in lower quality jobs, leading to worsened health outcomes. This is a particular concern for women, especially disabled women, who are more likely to have inconsistencies in their contribution history, more likely to be low earners, and are unable  or unaware how to effectively plan for their retirement. It is also grossly overlooked that the state pension is the greatest source of income for the majority of pensioners and represents a larger part of women’s retirement income than it does for men across all income groups. Yet, it is one of the least generous across OECD countries. In the absence of other sources of income, which disabled women and other under-pensioned groups are less likely to have, this alone is not enough to provide them with an adequate standard of living in their retirement years. Research from Poverty Alliance shows that older women have raised their concerns around pension adequacy, especially as they approach retirement or are in it.

Cost of living crisis, the lasting impact of Covid-19 & women's economic inactivity

The Covid-19 crisis amplified the gendered division of care, whereby women are still providing the majority of informal care for children, older and disabled people. The pandemic has made it more likely that unpaid carers, the majority of whom are women, will experience damaging effects on their pension contributions as they have found it more challenging to maintain employment.

The realities of living through Covid-19 have been different for men and women, and have presented particular barriers for disabled women’s activity within the labour market. The impact Covid-19 has had on employment and poverty has meant disabled women have often had to choose between the risk of losing their job or returning to the workplace and exposing themselves to the virus. Despite being at high risk, many women reported that they felt vulnerable to losing their job if they were unable to work. Moreover, women already in low-paid jobs, who would otherwise have been able to work from home, were not provided with the appropriate equipment or support. Due to their low-paid jobs, some could not afford broadband and this clearly shows the multiple barriers disabled women were facing in the height of the pandemic. Employment was not a route out of poverty, instead, it acted as a barrier to disabled women, placing them at greater risk of the virus and poverty.

Disabled women are at greater risk of financial insecurity as the extra costs to cover their care needs are much more difficult to manage when their income is modest. On average, women have lower levels of savings and wealth compared to men and before Covid-19, women were more likely to be in debt, with disabled women at greatest risk. Covid-19 and the rising cost of living has made this worse, directly impacting retirement savings.

In attempts to manage daily living costs, almost one in six women (16%) said that they have cut back on their retirement savings to manage the rising prices. This is highly problematic for women, older women, disabled women and others facing multiple forms of discrimination who were already disproportionately affected by the rising costs. While the recurrent crises have caused severe financial hardship for many marginalised groups, older women born in the 1950s and 60s, who have had their state pension eligibility delayed, have faced a unique set of challenges during this time as they are also the age group with the highest redundancy rate due to Covid-19. This cohort of women has faced several barriers in seeking employment at the intersection of sexism and ageism. This results in discriminatory recruitment practice with older women’s skills and experience undervalued. As a result, many older women are being forced to accept jobs that place them in a worsened financial situation and are exposed to living in poverty.

Delaying entitlement to the state pension has been a crude mechanism, which has had a strongly gendered impact on women, negatively affecting many older women and their financial, physical, and mental wellbeing. This policy change fails to account for the gendered differences between men’s and women’s lives, particularly in the unequal distribution of care, and the different experiences of disabled women in engaging with the labour market. For some women, as they near their retirement they find they are simply unable to work longer as part of managing their health and therefore cannot accumulate further retirement income. While there have been studies to point to the advantages of working longer, the benefits are only enjoyed when people feel they are not forced to do so.

What needs to change?

Often, we see the gender pension gap being framed exclusively as a problem that women must solve themselves. However, this is futile if we are to seriously address the long-standing structural inequalities that drive the gender pension gap. Placing the burden and blame on women for an ineffective system is entirely misplaced, and there is far more that the Scottish Government, UK Government, and employers should be doing to mitigate the impact on women, and in particular, disabled women.

While there are a range of factors which contribute to the high levels of inequality in retirement, and women’s pensioner poverty, tackling women’s low pay, which includes addressing the undervaluation of the types of work women do, is critical and cannot be overlooked. This persistent undervaluation of women’s contribution to the economy places them at greater risk of poverty, both in their working careers and in retirement. As such, employers need to better support disabled women in the workplace as they face deeper inequalities and are more likely to be living in poverty. This includes providing flexible working, reasonable adjustments, and going beyond to make sure their practice is not discriminatory.

Tackling the gender pension gap and women’s pensioner poverty requires measures that span childcare, women’s working lives, and across pension policy. This includes but is not limited to the UK Government raising more awareness and communicating any changes made to people’s pensions and addressing the gaps in knowledge surrounding people’s entitlements. Moreover, the UK Government should reduce the age requirement from 22 to 18 and remove the lower earnings limit to automatic pension enrolment. This is a key step in tackling poverty in retirement, as it excludes the lowest earners, who are typically women.

Close the Gap has called to replace the shared parental leave scheme with a fairer and less complex system of parental leave. The take-up has remained desperately low and excludes many who are on very low pay and those in insecure work, who again are typically women and particularly disabled women. Employers also have a role to play, as well as the UK Government, to help shift societal attitudes and to make it financially viable for men to take shared parental leave.

As our joint paper ‘A childcare system for all’ highlights, the provision of affordable and accessible childcare is a necessity to women’s gender equality. The Scottish Government should go further to address the pay gap and pension inequality with effective measures around the accessibility and affordability of childcare provision. The high cost of childcare can be prohibitive, and this is a significant financial barrier to women’s wider equality.

Without a gendered response to the current impact of the crises, and understanding the drivers of the gender pension gap, we face the risk of exacerbating women’s pre-existing inequalities within the labour market. This is especially true for disabled women who are subject to multiple layers of discrimination. The pension system is essentially built to produce unequal outcomes for women and men, and this needs to change. Without action, many women, especially disabled women, will continue to face a lifetime of inequality and poverty.