Women’s economic transition to retirement

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Image: CC0 Public Domain; the quotation below is from a report by the Chartered Insurance Institute

While women are increasingly better educated than men, they earn less, feel less financially secure, provide the bulk of unpaid care, have smaller pensions, face greater hardship in later life and struggle to pay for their own old-age care.

Across the world a combination of lower birth rates and increasing life expectancy is causing demographic ageing.

On a global scale the number of people aged 60+ is growing faster than any other age-group. They will outnumber 0-9 year-olds by 2030 and 10-24 year-olds by 2050. By the middle of this century, one in five people on the planet will be aged 60+. Whilst developing countries are included in this trend, it is most advanced in wealthier nations such as the UK and its constituent countries.

Demographic ageing has economic and social implications, which will require innovative and flexible policy measures both now and in the years ahead. Women are at the forefront of this process, as they generally live longer than men. As such, they are the guinea pigs for demographically driven policy change, particularly regarding pensions and later life wellbeing.

This article looks at a range of key factors and demographically driven policy changes impacting on women’s transition to retirement that affect their likelihood of a comfortable retirement.

The Gender Pay Gap (GPG)

On average, women earn less than men. The Northern Ireland GPG for median hourly earnings is 9% (18% for the UK as a whole). Lower earnings reduce pension contribution levels and, as a result, even women with lifetime work patterns comparable to men’s receive lower retirement incomes.

Recent media attention has focused on the narrowing of the full-time GPG between men and women in their 20s, as an indicator of future income equality. However, this does not take into account the increased age at which women are having their first child.

Differing lifetime employment patterns

Women’s employment patterns are closely connected to their family care roles, resulting in lower average levels of labour market participation, and higher levels of part-time and casual employment than men.

More women than men are employed on zero-hours contracts, and 70% of NI part-time workers are women. By the time their first child is 20 women, on average, have been in paid work for four years less than men, and have spent nine years less in paid work of more than 20 hours per week.

In addition to providing less work overall, part-time and casual hourly earnings are significantly lower than full-time ones, which negatively impacts pension contributions.

The ‘Motherhood Penalty’

In NI the economic inactivity rate for women is 30.1% compared to 21.1% for men, with family/home being the main reason given by women (for men it is being a student).

Women who take a career break to raise their families can suffer income and employment penalties for decades, caused by reduced training, development, and progression opportunities. The more children they have the bigger the penalty. Women on higher incomes are affected the most, as a higher proportion of their retirement income comes from private pensions.

Access to affordable childcare

Lack of access to good quality, affordable childcare can significantly reduce mothers’ labour market participation and pension provision, reduce income levels, and increase state welfare dependence before and after retirement.

From September 2017, English working parents will receive 30 hours’ free childcare a week for 38 weeks in their child’s pre-school year, taken in a variety of settings (including childminders).

In NI, parents receive only 12.5 hours a week, term-time only, not including childminders. At £168 a week (on average), full-time formal childcare is the second largest monthly outgoing after rent/mortgage. Nearly two thirds of parents struggle at some point to meet childcare costs, with 44% of mothers citing childcare costs as a reason for reducing their working hours, taking less demanding jobs, or giving up work completely.

Siobhan Fitzpatrick, Chief Executive of Early Years, has described NI as ‘…11 years behind the rest of the UK and Ireland and 4 decades behind Europe in terms of developing a childcare strategy’.

Increased longevity

Women live longer than men. In NI women make up two thirds of the 85+ age-group and nearly three quarters of those over 90. They make up higher proportions of the care/nursing home population and require more non-domiciliary care. All of which places a higher burden on their already lower retirement income.

The ‘Sandwich Generation’ and later caring roles

Family care extends beyond child-rearing years. After raising their own children through their 20s, 30s, or 40s, women may find themselves caring for grandchildren, and other family members, into their 50s, 60s and 70s. Leaving them little opportunity to save for retirement.

One fifth of women are providing unpaid care for elderly, sick or disabled relatives, rising to one third of women in their 50s. Women aged 45-54 are more than twice as likely as other carers to reduce their working hours and 1 in 7 women in their early 40s are caring for children and elderly relatives. Women are also four times more likely than men to give up work because of multiple caring responsibilities.


Divorced/separated women have, on average, less than a third of the pension wealth of their husbands. Many lower income women have no retirement savings at all. Several factors contribute to this.

Peak divorce/separation rates occur when most families have dependent children and the GPG is widening, and most children stay with their mothers (86% of UK lone parent households are headed by women). So, as women are entering their lowest income and savings period, they are also bearing many of the burdens associated with child-rearing alone.

Increasing later life divorces leave women, who were depending on household retirement income, little time to build pension wealth, with many women either unaware they may be entitled to a portion of household retirement income as part of a divorce settlement, or unable to legally enforce it due to cost.

Misconceptions regarding ‘common-law marriage’, also mean that women may be unaware that co-habiting does not have the same legal and financial security as marriage.

Accelerated changes in women’s State Pension Age (SPA)

In response to demographic change, the Pensions Act 2011 accelerated the rise in women’s SPA, so that it will reach 65 in November 2018 rather than April 2020.

Women Against State Pension Inequality (WASPI) claim this has given women little time to make the lifestyle/employment adjustments necessary to compensate for lost pension payments, leaving many reliant on low paid/casual work or lower level, conditional benefits.

There was cross-party support in the Northern Ireland Assembly for WASPI’s campaign.

According to the Institute for Fiscal Studies (IFS), the Government is saving £4.2 billion a year directly from these reduced benefit payments. However, for the women affected, the average drop in income is £50 a week for single women, and £34 a week for women in households. Average income poverty rates (after housing costs) increase by 6.4 percentage points, with single women, women in rented accommodation, and those with lower education levels disadvantaged most.

The effect is regressive – losses represent a far higher proportion of household income for lower income groups – and increased poverty levels are not currently mitigated by employment, which is particularly hard for this age-group to find.

 Conclusion: Accumulated disadvantage – the retirement income gender gap

In summary, women have higher levels of part-time, casual and low status employment, together with family/care related economic inactivity (exacerbated by poor availability of affordable childcare). This causes their average lifetime incomes to be significantly smaller than men’s.

At the lowest income levels, they may fall below the threshold for automatic workplace pension enrolment, and/or National Insurance contributions, impacting their entitlement to both the Single Tier Pension and private/workplace pensions in later life.

Divorce disadvantages women more as it frequently occurs when they have the least income and savings opportunities and are responsible for dependent children. In addition to this, women born in the 1950s currently face significant weekly income reductions for a period before retirement, caused by demographically driven changes in State Pension Age.

As a result of these inequalities, women accumulate less pension wealth than men, have significantly lower retirement incomes, and are more reliant on state support in later life. UK men retiring in 2017 will be 45% better off than women, receiving an average yearly retirement income of £20,700 – £900 a year more than men who retired in 2016. Women, on the other hand, will receive an average yearly retirement income of £14,300 a year – £6,400 a year less than men, and £200 a year less than women who retired in 2016.