As we celebrate International Women’s Day 2025 today, we will, no doubt, be inundated with marketing messages, positive quotes and promises to do better to close the gaps that women face with pay, pension, protection and investment, says Susan Hope, IFA Workplace Senior Manager at Scottish Widows.
The theme of IWD 2025 is “Accelerate Action” and Susan believes that it is the perfect sentiment for the position we find ourselves in as she explains in her blog as follows:
To highlight the need for urgent action, I only need to mention the Equal Pay Act which was brought in back in 1976. Fast forward nearly fifty years and the gender pay gap persists at 13%. Our future generations cannot afford another half century of incremental gains, we need accelerated action now.
Many of our mothers and grandmothers are living in retirement poverty, according to the definition supplied by the PLSA. State pension equalisation, lack of financial education, traditional generational gender roles, and income inequality all playing their part. The compounding effect of part time work, career breaks, divorce and lower lifetime earnings create retirement planning challenges that need bespoke advice.
At the other end of the retirement journey, we have young women entering the world of work, faced with the structural inequalities that lead to the average retirement income difference of £5,000pa (£17,000pa vs £12,000pa) before they even create their LinkedIn profile. Our conversations on early career savings are fundamental to turning this situation around.
As a chartered financial planner, with loved ones at both ends of the retirement spectrum and my own experience of divorce, self-employment and a career break, I can bring a unique insight into what we can learn from previous generations, and what action we can take to create a different outcome for our young people. The best way to predict the future is to create it. Our industry holds the key to breaking this cycle.
The problem with the current defaults
Earnings and working patterns
The cornerstone of the gender pension is the gender pay gap, with each pound of pay gap today multiplying into pounds of pension disparity in the future.
Pensions outcomes are closely linked to earnings and working life patterns. We cannot ignore that women consistently find themselves in lower-paid positions, working less hours often with career interruptions in the form of caring responsibilities. This creates a compounding disadvantage compared to men who typically maintain higher wages and continuous years of employment.
Career breaks and childcare
Next up is childcare and caring responsibilities. Women disproportionately shoulder the burden of caring for both children and elderly relatives, with childcare costs taking up to 60% of the average UK take home wage. During these periods, they are not just pausing their careers – they are pausing their earnings and pension accumulation.
Employers have a role to play. Equal parental leave, though legally available, remains stigmatized. Until we see senior male leaders role modelling this behaviour and employers actively encouraging its uptake, we continue to contribute to a system that disadvantages women’s long-term financial security.
Flexible working policies and return-to-work support could also ensure that women can work in the industry that they have experience in and are qualified in, whilst managing caring responsibilities.
For maternity / parental leave – are we facilitating pre-emptive conversations bringing to life the impact of leave on pay, pension, and progression before the period of leave takes place, to ensure that preventative action can be taken, and pension contributions can continue.
Given that 42% of women are going to be reliant on the state pension to provide them with retirement income it’s important that the impact of career breaks on NI contributions are understood. Clients can still plug gaps back to 2006 until April this year, then from April they can go back 6 years.
Third-party contributions – can clients consider closing their daughter’s gender pension gap?
Front loading contributions – key for young women entering the workplace, to “stockpile” before they take career breaks.
Annuity purchase
We must also address the troubling statistics around annuities, with 85% of annuities purchased being single life. This is a systemic failure to protect women’s financial futures, given that men generally have the larger pension fund, a younger spouse and shorter lifespan. The default must shift to joint life annuities, ensuring that women are not left financially vulnerable in their later years.
Divorce
Our Women and Retirement report shows that 60% of women did not discuss pension assets as part of their divorce, potentially costing £77,000. Despite pension wealth often being the second largest accumulated asset, it’s frequently overlooked in divorce settlements. Many women focus on retaining the family home and short-term security, unknowingly trading away their future financial security.
It was encouraging to see The Law Commission publish a scoping document in December on “financial remedies on divorce” recognising the need for change.
We do need to see mandatory pension sharing information in divorce proceedings.
Can joint annual review meetings be the default? To provide full transparency around the family assets.
The lack of a “Plan B” – Women are still vastly under insured.
In recent years, the conversation around gender gaps has expanded beyond pay and pensions to include the critical area of protection. Women are generally less prepared for financial emergencies than men. This lack of a “Plan B” can leave them vulnerable to sudden financial shocks. 1 in 5 people (22%) don’t have enough savings to cope with a financial emergency. This figure rises to almost 1 in 4 for women.
So, what is stopping women taking out protection?
One of the main reasons women don’t have protection is that it is not seen as a priority. It is no secret women are leading busier lives than ever before and protection is not always at the top of people’s to do lists. Women aren’t always great at prioritising themselves, they’ll put their families first but in doing so can miss the true benefit protection can bring to them.
But ultimately, lack of understanding seems to play the final part, according to recent research by Scottish Widows 14% of the women surveyed didn’t understand what income protection was and 8% thought income protection is too complicated to arrange. Traditionally, women have not taken measures to seek out financial advice. This could be because they do not see the need for it but also because they cannot relate to what they see as a typical financial adviser.
A woman in her early 20s, just starting on a career path, might not think to see a financial adviser, however, according to our research, older women don’t either. 43% of women surveyed had never consulted/sought advice from concerning any form of protection.
Looking forward
The advice community has the technical expertise and experience to support the closure of these gaps. Our professional actions today will help shape retirement outcomes for our young people. The cost of inaction is too high, not just in pounds and pence but in the financial security and dignity of our clients.
Written by Susan Hope, IFA Workplace Senior Manager, Scottish Widows.
