Irish Life ran a great ad ran last year, showing women queueing up at an ice-cream van on a summer’s day to buy a 99.
Imagine their disappointment to be told they could only be served a “77”.
Well, it’s the same ice-cream, but yours is 22% smaller. Heck, even the flake is tiny!
Why? Because you’re a woman.
It was a great way to bring alive the difference between women and men’s financial situation when it comes to pensions.
We wouldn’t accept this situation if we were buying an ice-cream. So why does it continue to exist for our financial futures? And what’s being done to change it?
These are the questions we’re exploring on 24 September as part of Pensions Awareness Week Ireland 2020.
We’ve got some great guest lined up, including Teresa Kelly Oroz, head of Public Policy at Irish Life, employee engagement specialist Susan Elliott, Leanne Long from Financiallyfit.ie, as well as Olive Ryan from the Moneycube team. It promises to be a really useful session and we’d love you to join.
Why is there a gender pension gap?
A lot of the reasons for the gender pension gap are well understood. There are three big ones.
Firstly, there’s the gender pay gap. It’s been clear for some time that women – on average – get paid less than men.
What’s less obvious is the lifetime effect of this. Because your pension is typically based on a percentage of your pay, the amount you’re paid has a direct impact on how quickly you build up a pension pot.
Then there’s a compounding effect. Less money is invested, and that in turn generates less investment growth within your pension.
Secondly, women are more likely to take time out of the workforce, and to work part-time. Again, that often results in years of missed or low pension contributions.
Lastly, women are less likely than men to possess a pension at all – particularly among those approaching retirement. Research last year from the Pensions Policy Institute found that among people in the UK aged 50 to 59, two million had no private pension. Of those two million, there were 50% more women than men.
What needs to change?
Government, companies and individuals have a responsibility to make pensions fairer for women.
The good news is that some of this is already happening.
For example, the state pension helps to level things up.
Abroad, mandatory data on the gender pay gap from big employers is also exposing the difference – it would be interesting to do the same in Ireland.
Shining a light on the problem is the first step towards fixing it. Now companies need to act on that data to help close the gap.
But above all, we as individuals need to build on this progress, and take action to fix things. Here are two practical suggestions to get the conversation started.
Think long term
Firstly, it’s time to help women to think of the long-term financial implications of household decisions.
Financial decisions are often taken as a household. But the effect of those decisions is not always spread evenly. To take a current example, there’s evidence that women’s careers are being harder-hit by lockdown measures.
It seems that women are more likely to lose their jobs, not to mention the fact they are more likely to pick up extra home responsibilities arising from lockdown.
Career breaks shouldn’t mean pension breaks
Secondly, career breaks shouldn’t mean pension breaks. If one partner takes time out of the workforce, it could become normal for the other partner to contribute equally to their pension.
Until that happens, women weighing up the costs of taking time out need to look at the long-term costs, not just in terms of a couple of years’ lost pay.
It’s going to take time before women’s pensions are the full 99. But there are many practical actions we can take to help the gender pension gap melt away.
As part of Pensions Awareness Week 2020, Moneycube is hosting an online discussion on women and pensions on 24 September. Find out more and register.