Salary and career length differences between the genders can result in women retiring with pension pots worth €120,000 less than men, according to a report published this week by Irish Life.

The Irish Life research, titled In Search of Pension Parity: Ireland’s Gender Pension Gap, analysed a host of potential causes of the gender pension gap. It found that while there are no real material differences between the retirement planning of either gender, differences in salary and the duration of time spent in work throughout a career could lead to women retiring with significantly smaller pension pots than men.

Irish Life analysed current data, gathered during 2018 and 2019, from the company’s defined contribution pension client base. The report highlights the need to address both financial and social issues so more women can retire with pension pots at the same level as men.

The research shows that while both men and women are making similar percentage contributions to their pensions (approximately 11% of salary including both employee and employer contributions and AVCs), that translates to a much smaller monetary contribution for women than men. This is driven by the difference in base salaries between the genders, which reaches its peak when men and women are in their early 50s.

The other major contributing factor is time spent in the workforce. European studies show that men spend seven years more in paid employment than women and Irish Life data shows that women are three times more likely to reduce their hours, which might suggest that more women are taking breaks or going part time to have/raise a family or to take on the role of carer.

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As pensions are largely tied to salary, time in paid employment is a significant factor when it comes to the gap.

Teresa Kelly Oroz (pictured), head of public policy and governance with Irish Life, said that the organisation analysed 80,000 pension plan members across 1,400 pension schemes in March of this year to unearth the trends.

“Looking at those in our Direct Contribution (DC) schemes, we can see that women are likely to have pension pots of 22% less than men at retirement age,” said Kelly Oroz. “And this is quite a conservative figure compared to the European gender pension gap of 37.5%. What really exacerbates the issue is the fact that women live longer than men, which means they need to make their smaller pots last even longer.”

Other factors that impact on pension value which were analysed in the Irish Life data were the age of enrolment in a pension and the attitude to risk. In each case, there was found to be no material difference between men and women in how they plan for retirement.

Pensions Initiatives

The Irish Life report also proposes initiatives to address the gender pension gap under three headings:

+ Regulatory solutions: Government legislation to provide a fairer system for women, with a progressive auto-enrolment policy. Specific tax measures to help bridge the gender pension gap by offsetting the knock-on effect of periods of unpaid leave on pension funds. Policies to allow equal labour market access, including the provision of childcare supports and long-term care services can play a key role.

+ Pension plan solutions: Plan providers could help plan members maximise their pension outcomes through pension support services for new parents and employees on parental leave, online pension payment solutions and flexible contribution structures.

+ Corporate solutions: Companies operating in Ireland can do more to make changes to their corporate policies to help balance the burden of responsibility including paid maternity leave, enhanced paternity leave, corporate transitioning policies and commitments to diversity and inclusion.

“The gender pension gap starts to widen when women reach their thirties, so pension plans need to cater to this,” said Kelly Oroz.