Only by addressing structural barriers will we close gender wealth gaps
The gender wealth gap in the UK stands at 21%. On average men have £78,000 more wealth than women. Almost all of that gap is driven by pensions. [1] The gap is widening, not shrinking.
The usual response to the gender pensions gap is that it is driven by the gender pay gap. This is partly true, but it’s not the whole story. If we are serious about closing the wealth gap, we have to stop treating pensions as an isolated problem.
It’s not possible to build wealth without the foundations in place
The evidence consistently shows that people can’t build longer-term financial security without solid foundations in place:
- First having steady and liveable income and expenses.
- Next building a buffer of emergency savings to cope with financial shocks.
- Only with this resilience in place, does it start to become more possible to work towards future goals and longer-term needs. But disproportionately, women are not getting to this stage.
Women are getting stuck in short-term money management, unable to build for the longer term.
Women are nearly twice as likely as men to be classed as ‘struggling’ – the least financially resilient of the Money and Pensions Service’s financial wellbeing segments.[2] Women are more likely than men to say that it would be a stretch to put money into savings accounts, investments or pensions and less likely to feel confident that they have a plan for retirement.[3]
One driver is the division of labour and resources within households. In different-sex couples, women tend to take on the burden of managing day-to-day finances. Juggling bills, budgeting tightly, and smoothing volatility month to month leaves little bandwidth to research saving options or plan ahead.
Another factor is motherhood – not just time out of work for maternity leave, but the impact in the years after. Women are more likely to reduce their hours or restrict work to jobs closer to home. This has direct impacts on both their immediate take-home pay and lifetime earnings and pension-saving potential. While childcare costs tend to come out of the mother’s money, pension contributions continue to flow uninterrupted for fathers who remain in full-time work.
Single parenthood intensifies these pressures. 90% of single parents are women. Single parent families are more likely than couple families to have no savings.
This gap is not just a gender issue. It’s compounded by intersectionality
In a pattern that is depressingly replicated in so many parts of life, these gender gaps are compounded at the intersections – the pensions gap is bigger for women from global majority backgrounds, from lower socio-economic groups and for women with disabilities. There’s not enough data on these intersections, or understanding of the drivers. We need to do more on this.
Too often we’re pointing the finger at women, when the barriers are structural
Assumptions are made that the problem that needs to be addressed is a deficiency in women themselves. We hear that women need to be taught about pensions. That they lack capability and confidence.
When I think of the incredibly smart work that I see women doing to manage household money day-to-day under constraint, that seems to miss the mark to me.
What if the barriers to women’s wealth building are structural? What if women lack confidence because they are trying to navigate a system designed around masculine ideals. A system where pension calculators assume that you work continuously until retirement. Which assumes that it’s a mothers’ pension that will take the hit when a household has a child. Which assumes that single mothers have time to seek out a savings scheme and go through a complicated sign-up process to get a savings boost.
What would it mean to design a system that works better for women? And in particular for women from vulnerable and marginalised groups?
Our work at Nest Insight points to some potential solutions. Behavioural support is a more effective approach to savings inclusion that education or incentive based interventions. We’ve piloted workplace-based approaches that make it much easier to get started with saving, in which people who want to save start doing so automatically, without having to take lots of steps to get there. This dramatically boosts savings participation, particularly amongst those who had previously been excluded from saving.[4]
What if we designed in some more defaults to address structural barriers that impact women?
Help-to-save accounts automatically opened for people at the point they claim the benefits that give eligibility? Employer pension contributions by default for lower earners who opt-out of pension saving because they need to build short-term resilience before they can lock money away for the long term if they are saving into pensions-adjacent emergency savings? An automatic prompt and payment link at the point someone goes on parental or caring leave to make it a norm that if one member of a couple takes time out, the other splits their pension contributions between them? Carers credits paid into the pensions of those doing unpaid caring labour, perhaps funded through rethinking other savings incentives and matches?
Pensions are a long-term issue. The longer we wait, the wider the gap. So the sooner we get started on tackling it, the better.
Author Bio: Jo Phillips leads Nest Insight’s public-benefit research and innovation programme, with a focus on finding better ways to support low- and moderate-income households to be financially secure, both today and into retirement. Working collaboratively with industry, government and academic partners, Nest Insight conducts research to better understand the challenges people face, and develops and pilots practical real-world solutions to those challenges.
Before joining Nest Insight in 2018, Jo worked in research and strategy consulting roles, leading insight and innovation work addressing a range of future opportunities, including in personal finance and pensions.