How to fix the gender pension gap

Sep 27, 2021

Retired couple sat on a bench looking out to sea.

The pensions gap needs to be tackled from several perspectives and by multiple stakeholders. Image: Unsplash.

David Knox

Senior Partner and National Leader of the Research Practice in Australia, Mercer (MMC)

Yvonne Sonsino

Partner, Global Transformation Services, Mercer (Marsh McLennan)

Our Impact

What's the World Economic Forum doing to accelerate action on Gender Inequality?

The Big Picture

Explore and monitor how Gender Inequality is affecting economies, industries and global issues

A hand holding a looking glass by a lake

Crowdsource Innovation

Get involved with our crowdsourced digital platform to deliver impact at scale

Stay up to date:

Gender Inequality

Listen to the article

The gender pension gap is a problem in most retirement income systems around the world.
The causes and compounding effects are related to employment and pension design as well as socio-cultural issues.
These issues need fixing at a multi-stakeholder level by HR and pension leaders, governments and women themselves.

The gender pension gap exists in virtually every retirement income system around the world. The range is remarkable, with Japan having an almost 50% gap whereas Estonia’s gap is less than 5%. By today’s values, on an average wage this gap can represent $8,400 per year in the US and £6,000 per year in the UK.

Have you read?

Causes of the gender pension gap

1. Employment related

There is a direct relationship between the pensions arising from occupational pension schemes and employment patterns. Women’s pensions are lower for the following reasons:

Shorter careers due, on average, to a slightly later start in the labour force and/or career gaps for childbirth, and earlier retirement.
More part-time work, which might be choice driven but is often to cover the requirements of the parent and/or caregiver role.
The long-term effects that limited employment for a number of years has on promotion opportunities and pay progression.
Lower average salaries for full time women workers, despite 72% of organisations globally reporting that pay equity is part of their compensation strategy.
The average wage in women dominated industries, such as as hospitality, health and education is lower than in industries dominated by men.

2. Pension design related

There are several design features which aggravate the gender pension gap which include:

Eligibility restrictions which require a minimum salary and/or a minimum number of hours to be worked.
Payment of contributions and/or the accrual of pension benefits may not be required during periods of paid maternity or parental leave.
Retirement payout options may be limited for women if they require a minimum accumulation or a minimum eligibility period.
Gender-specific mortality tables lead to smaller annuities for women due to their lower mortality rates.

The following issues adversely impact because of women’s longer life expectancy:

The absence of survivor’s benefits when pensions are paid.
The lack of indexation of retirement income benefits.
Switching from Defined Benefit (DB) pensions to Defined Contribution (DC) arrangements, where the same accumulated cash sum may generate a smaller lifetime income for women.
Draw down/withdrawal models, may mean that the income will run out for women before they die.

Discover

What's the World Economic Forum doing about the gender gap?

The World Economic Forum has been measuring gender gaps since 2006 in the annual Global Gender Gap Report.

The Global Gender Gap Report tracks progress towards closing gender gaps on a national level. To turn these insights into concrete action and national progress, we have developed the Gender Parity Accelerator model for public private collaboration.

These accelerators have been convened in twelve countries across three regions. Accelerators are established in Argentina, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Mexico and Panama in partnership with the Inter-American Development Bank in Latin America and the Caribbean, Egypt and Jordan in the Middle East and North Africa, and Japan and Kazakhstan in Asia.

All Country Accelerators, along with Knowledge Partner countries demonstrating global leadership in closing gender gaps, are part of a wider ecosystem, the Global Learning Network, that facilitates exchange of insights and experiences through the Forum’s platform.

Have you read?

In these countries CEOs and ministers are working together in a three-year time frame on policies that help to further close the economic gender gaps in their countries. This includes extended parental leave, subsidized childcare and making recruitment, retention and promotion practices more gender inclusive.

If you are a business in one of the Gender Parity Accelerator countries you can join the local membership base.

If you are a business or government in a country where we currently do not have a Gender Parity Accelerator you can reach out to us to explore opportunities for setting one up.

3. Socio-cultural issues

Characteristics within many societies and cultures aggravate the pension gap. These include:

The absence of affordable and appropriate quality childcare restricts work opportunities for women.
The impact of childcare costs on the ability to make additional voluntary pension contributions as these costs are often paid directly by women, leaving them less disposable income for savings.
Within DC arrangements where investment choice is available to individuals, women are often more risk averse, which can lead to lower returns over the long term.
Lower levels of financial literacy amongst women in some cases which can also affect their financial decisions.
Communication and other campaigns from pension providers often ignore needs that are specific to women and use language that does not appeal to women.
Pension rights accrued during a partnership may not be evenly split on divorce or separation.
Women may prioritise current spending on the family home and others over themselves and/or longer term saving for retirement.
Gender stereotyping can lead to educational differences (for example, in maths and sciences) and an expectation that women do more unpaid family work.

Given the variety of causes and compounding effects of the gender pension gap, there is no single solution. Rather, this pressing issue needs to be tackled from several perspectives and by multiple stakeholders.

Ways to fix the gender pension gap

Bear in mind that it takes a lifetime of saving to finance a pension. Therefore, for those already in later life, there will be some serious catching up to do. Here are the key calls to action for relevant stakeholders:

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.