Addressing the gender pension gap and why many women are still missing out!
According to the European Commission’s 2024 Ageing Report, the over-65 population is expected to grow significantly, with women making up a larger share, especially after 75. Addressing the gender pension gap is complex, as it stems from demographic shifts that challenge existing pension systems financially and fiscally. The EU has promoted system adaptations and transparency measures (e.g. pension dashboards and tracking systems), but broader policy changes—such as shifting social attitudes on gender roles and improving childcare availability—are also necessary. Even with the right measures, closing the gap will take generations.
In the UK and Ireland there are still a large number of women who are not earning enough to be automatically enrolled. This means that many women may still miss out on pensions due to the way pension plans and legislation are designed. This is particularly acute in the informal working sectors i.e. zero-contract employment and agency workers. This issue is global, especially in Asia and Africa, with hundreds of millions of female casual workers missing out on the security of a pension.
The gender pension gap is a complex issue with multiple contributing factors, and addressing it requires a multifaceted approach. The gap is particularly pronounced in countries with high levels of part-time employment for women, as well as in regions where occupational segregation and gendered stereotypes persist. In the EU, the gender pension gap averages 29%, significantly higher than the 13% gender pay gap. This disparity is largely due to women’s tendency to work in lower-paying jobs, take more career breaks, and work part-time, all of which affect their pension savings. Behavioural factors, such as risk aversion and lower financial literacy among women, also play a significant role in the pension gap.
To mitigate the gender pension gap, the European Commission suggests several measures. These include increasing financial literacy among women, promoting private pension savings, and improving pension system transparency. Additionally, addressing social and cultural factors, such as encouraging equal caregiving responsibilities and challenging gender stereotypes, is crucial. However, in Germany, there is a marked recognition of a higher number of women choosing to be the main care giver as opposed to the father, which begs the question that choice should always be offered. Policies that focus on work-life balance, accessible childcare, and paid family leave can help reduce the long-term impact of career breaks on women’s pensions.
Both the OECD and EIOPA’s recommendations include promoting greater awareness among women about the pension implications of their career choices and encouraging government reforms to supplement public pension systems with private plans. Greater financial knowledge could also be accessed from school age so that women can access the information earlier rather than waiting for employment. Other measures could involve promoting gender-neutral pension policies and increasing female participation in pension systems through auto-enrolment.
Ultimately, reducing the gender pension gap will require a combination of financial education, policy reform, and cultural change. By targeting specific issues, such as financial advice, income inequality, and the sharing of caregiving responsibilities, we can begin to close the gap, though it may take generations for these changes to be fully reflected in pension outcomes.
In the short term more could be done to expand pension eligibility for all low paid workers which would benefit women particularly as well as men. For example, the minimum auto-enrolment earnings thresholds of £10,000 and €20,000 in UK and Ireland respectively could be reduced or removed completely in order to tackle this profound issue. This would be in line with Nordic countries like Sweden who have no lower earning thresholds and in Norway which removed its lower limits in 2022.