Centre for Ageing Better
9 Aug 2020
Our Evidence Officer, Nayyara Tabassum, explains the impact on women's finances at different stages of life, from early careers to retirement.
Increases in life expectancy mean that retirement is longer now than it was for previous generations. A 65-year-old man today, for example, should plan for another 19 years of living expenses. For a woman the same age, that goes up to 21 years. This means we all need to save much more into our pensions than we used to – and this can be particularly challenging for women.
No matter how diligently women save, on average a woman is likely to have a smaller pension pot than a man. This is because income inequalities at different stages across women’s life course can have a cumulative effect on what we are able to save.
Income inequality usually starts with a gender wage gap when a young woman joins work, continues through maternity and caring responsibilities, via life transition experiences like divorce or widowhood, and then ends with an unequal income in retirement.
Data from the World Economic Forum show that 99.7% of men and women have equal levels of education in the UK. However, once men and women start embarking on their respective careers, their career trajectories look very different. Academics and scholars very poignantly label this career trajectory difference in men and women the ‘gender scissors’. Just like a pair of scissors that start at the same point, once the scissors are opened, one side goes up and the other goes down.
Similarly, once out of university, men and women start at the same point. But as their career progresses, men’s career trajectories tend to go higher and women’s tend to go lower.
Income inequality typically starts from the moment a woman steps into her first career. The gender pay gap is still a real issue. Twelve women working at the BBC are set to take the news corporation to court over allegedly routinely paying women lower salaries than men. The gender pay gap is particularly prevalent in STEMM sectors where women typically get paid lower salaries than men for doing the same jobs.
These income inequalities add up over the life course and can determine every aspect of later life
The next transition point in the life course in which women face income inequalities is at the point of motherhood. For many women, especially those that work in private sectors with less than generous maternity policies, this career break can have a big impact on their incomes and pension savings. Some call this the ‘motherhood penalty’.
There are other life course stages such as caring responsibilities, divorce and bereavement that can equally impact women’s incomes and pension savings. Often, women are ‘sandwich carers’, assuming caring responsibilities for both children and older relatives. This requires many to take time off of work, affecting their wages, pension contributions and thus their later life incomes. Divorce and bereavement, which a lot of women experience in later life, can also affect their retirement incomes, with many losing access to a more financially comfortable retirement.
These income inequalities add up over the life course and can determine every aspect of later life – from how frequently we can afford to use heating in winter, to going to restaurants with friends and loved ones, to how many holidays (if any) we can take in a year.
Today, too many women face a lifetime of low incomes. This doesn’t have to be the case. While we don’t have all the solutions at our fingertips, there are a few crucial steps to be taken. More employers need to offer flexible working to prevent women falling out of work and losing out on pay and progression. Greater financial awareness and education can also help people to plan and prepare financially for retirement. Awareness raising around this issue, and greater efforts to tackle inequalities from employers, policymakers and stakeholders, can help reduce the cumulative effects of income inequality for women in later life.