New research from equity release lender more2life and economics consultancy Cebr has found that women lose £2,400 per year in retirement as a result of taking time out of the workplace – often to have children – with women who took three or more years seeing this loss increase to £3,060 annually.
The gender split is readily apparent, with 68% of women aged over-55 in the UK having taken time out of the workplace compared to only 22% of men the same age.
The main driving force behind this was the need to take maternity leave to look after children, with 53% of women taking career breaks for this reason compared to just 1% of men over-55 having done so.
A higher proportion of women compared to men felt that taking a career break led to a lower retirement income (48% vs 38%) and women were also more likely to call this impact ‘significant’ (30% vs 17% of men).
However, men who take a career break see their retirement income fall more sharply compared to their counterparts than women in the same situation – the research shows a drop of £4,680 compared to men who did not take a career break, nearly twice that of women. Men also take less time out of the workplace than women on average, 2.7 years (cumulative) compared to 4.9 years (cumulative) for women, and still see this sharper fall.
The data shows that men will also see retirement income notably reduced if they take extended parental leave, potentially discouraging people from breaking down the gender expectation that a mother will take time off work to raise children, not a father.
However, it must be noted, that men who see this loss of retirement income due to a career break only receive £48 less each year, just £4 a month, than women who did not take any career break at all, as a result of the gender pension gap.
Given the proportion of women experiencing this reduction in retirement income and the gender pension gap as a whole, it is unsurprising that men are also far more likely to own pension wealth independently (46% vs 36%). Men over-55 are also more likely to have independent wealth in other forms such as cash savings (45% vs 43%), tangible assets (30% vs 25%) and investments in stocks and shares (22% vs 14%).
That said, older women were more likely than men to have independent wealth when it came to property, with 27% of women owning property independently compared to 17% of men.
However, this trend goes beyond just men having more independent wealth than women, as women often do not have any independent financial fallback option at all. Only 36% of women surveyed owned independent pension wealth and more (37%) did not have any pension wealth at all, a slight drop compared to the 40% that reported no pension wealth whatsoever in our 2021 research.
Les Pick, director of manufacturing and adviser propositions at more2life, said: “While the gender pension gap that is facing women is typically due to lower salaries, the fact that women are being penalised for taking time out to caring for their children is extremely frustrating. As a country, we know that people are reaching retirement with insufficient pension savings and if we want to manage this challenge, we need to consider how we allow people to raise their families and grow their pension pots at the same time.
“We also need better understanding and greater systems in place to ensure that the slower career progression, reduced retirement savings and less financial independence that women have come to expect are not only identified and addressed in the office, but in retirement too. The fact that more women than men are likely to own property wealth gives one ray of hope as to how we can address the shortfall in the near term, and we’re committed to making sure advisers have all the tools to discuss equity release with those that may need it.”