Does the gender pensions gap matter?

But does having a smaller pension matter?

As is often the case I think the answer is, it depends.

Many women work part-time after the birth of their children, whether this is a choice or enforced due to high childcare costs. Even for those that return full time, they will still have time off and / or a period potentially only on statutory maternity pay that immediately dents pension contributions, and we all know about the impact of compounding over the years. Not to mention the effect on career development of taking a break, plus the pay cut and knock-on effect on contributions if hours are reduced.

The net result is commonly a significant pension gap between the mother and father by the time they get to retirement. I have seen suggestions that the impact could be lessened by the father paying more into the mother’s pension even though her allowances are likely lower due to lower earnings. This is true, but often the father will pay tax at a higher rate, so paying into his own pension makes far more sense when you holistically consider the family unit. If you get to the point that Dad’s allowances are used up, then yes, pay into Mum’s too.

Provided the couple spend their retirement years together, an imbalance isn’t necessarily an issue. If Dad pays more of the bills when working, this can continue into retirement. And if Mum is the recipient of the pension on Dad’s death, then she will be provided for if she’s the survivor.

Of course, the big issue arises if they aren’t together in retirement. For married couples who divorce it is crucial that the pension is properly considered. Sadly, this isn’t always the case, and the focus is often all on the house. If Mum has given up work, or cut hours, and thereby reduced her ability to build her own pension, then this should be accounted for when deciding how much of the husband’s pension should go to her. If this is properly dealt with then some of the pension gender gap should be reduced.

For unmarried couples it is trickier. There is no legal way a pension can be shared between those not married or in a civil partnership. For these women the pension gender gap really does matter, and for unmarried couples having the partner pay into her pension when she’s working less to look after children does make sense.

And of course, for single women, the pension gender gap absolutely matters. There is no justifiable reason why the pensions of single people should differ based on gender.