A recent survey carried out by Bank of Ireland focused on women’s confidence regarding financial planning and managing money. The survey results outlined the variations between men and women’s approach and confidence when it comes to money management. At a high level, it was found that: 

  • 50% of women said they were confident managing money compared with 56% of men
  • 15% of women confident enough to choose investments without advisor vs 27% of men

Similarly, discrepancies between men and women were highlighted when it came specifically to pensions. Bank of Ireland noted that women are less likely to have a private pension, and that the gap increases significantly for older age groups. Women are also less likely to understand the tax breaks associated with pensions (37% for women vs 51% for men), the research found.

While the emphasis of this report was on women’s confidence regarding finances and pensions, we know that there are numerous other factors at play which cause the gender gap in pensions. Various studies in this area have been carried out. In 2019, Irish Life found that women’s pensions in Ireland are 22% less than men, but an ESRI report published in the same year found this disparity to be as high as 35%. Regardless, we know that there is a substantial gap. So, aside from a lack of confidence, what are the other contributing factors?

  • Gaps in employment – Women are more likely to take time out of the workforce for maternity leave and subsequent parental leave. Although this time out of the workforce may only equate to a small proportion of overall working life, a gap in pension contributions at an early stage can have a cumulative impact on the growth of a pension pot over time. 
  • Longer life spans – In Ireland, women are likely to live almost 4 years longer than men on average. This extended life span increases the requirement for retirement funding, putting additional pressure on an already reduced pension pot.
  • Variances in base salaries – Although, on a percentage basis, women and men’s pension contributions are relatively equal, the issue of the gender pay gap has a direct impact on women’s pension pots. Women are also more likely to possibly work reduced hours which has a direct impact on their base salary. 
  • Perceived lack of knowledge – The Bank of Ireland survey found that women are less likely to believe they are knowledgeable about financial matters. While this may not be true in practice, a perceived lack of knowledge can heighten a lack of confidence as well as the tendency to seek financial advice.  

Although the above factors can and do contribute to a gender gap in pension funding and subsequent retirement income for women, there are steps that can be taken to reduce or avoid this disparity. 

  1. Join a pension plan at your earliest opportunity. This will mitigate the impact of any gaps in employment and allow the fund to grow during periods out of the workforce. 
  2. Maximise pension contributions. Employers will often match contribution rates. If feasible, you should also consider making Additional Voluntary Contributions (AVCs).
  3. Link salary increases to pension contribution increases. Often times, this can be applied automatically if your contributions are expressed on a percentage basis.
  4. Continue to contribute to a pension plan while on maternity leave and, where feasible, during gaps in employment, to ensure the impact of such changes are minimised.
  5. Seek Financial Advice. A financial advisor will assist in calculating the required level of funding to ensure a sufficient pension pot is in place in retirement, as well as ensuring the investment strategy applied is appropriate

Although the gender gap in pensions is a very real concern for women in Ireland, the above steps can ensure that this gap is minimised where possible. The good news is that current statistics seem to point to trends moving in a positive direction. The Bank of Ireland survey found that, while only 32% of women aged over 55 have a private pension, compared with 58% of men, 29% of women aged 18-34 have a private pension (vs. 32% of men). These results indicate that women are taking a more proactive approach to pension funding from a younger age. If we pair this with increased co-operation from employers and regulatory support, we could see the gender gap in pensions reducing in years to come. 

Eve Nolan
ITC Business Development Manager

 

 

 

 


 

*Please note this content is the view of the author and not of Independent Trustee Company