BY JOHN ELLIS, FINANCIAL ADVISOR
New research has revealed that women in Ireland must work an additional eight years to accumulate the same pension pot as their male counterparts. The 2024 Gender Pension Gap Report from Irish Life highlights a significant 36% gap.
The report identifies two primary factors contributing to this disparity: salary differences and time out of the workforce. On average, women’s salaries are 22% less than men’s, and they spend six years less in paid employment, primarily due to maternity leave and family responsibilities.
This gap is wider in Ireland than the European average of 4.5 years, according to Eurostat.
These factors have led to substantial differences in accumulated pension funds, despite men and women starting their pensions at the same age and contributing similar percentages of their salaries. This indicates that saving habits do not contribute to the gender pension gap.
Shane O’Farrell, Director of Employer Solutions at Irish Life, emphasises the lesser known yet critical issue of the gender pension gap. “While the gender pay gap gets plenty of attention worldwide, the gender pension gap is not as well understood. This is despite the gender pension gap being much larger and having a significant long-term impact.
“The answer simply cannot be women continuing to work for eight more years while the men in their workplace retire,” he says.
The research analysed data from more than 130,000 Irish Life pension plan holders calling for collaborative efforts from government, pension providers, and employers to address this gap.
They recommend several measures to bridge the gap. The Government should implement specific tax measures to support those on unpaid leave. For instance, increasing tax-efficient contributions for those whose pensions have paused due to maternity, parental, or adoption leave could make a significant difference.
Furthermore, the government could allow for tax-efficient pension contributions to a partner’s fund during their leave. This would ensure continuous growth of the pension pot even when one partner is temporarily out of the workforce.
Lower the auto-enrolment salary starting point to €17,600 to include all income levels. Ensure workers with multiple employments are automatically included.
Allow non-earners to contribute to a level that will allow them to receive the State top-up as a tax credit and part-time workers who do not meet the salary threshold should have the option to opt-in and receive employer contributions.
But it’s not all unwelcome news as the data from the past three years shows a positive trend, with salaries growing at similar rates for both genders suggesting a gradual shift towards a more balanced workplace. And with the government working on the roll out of the auto-enrolment programme, it will provide a much-needed boost as only 47% of all workers currently have a private pension.
While the gender pay gap often makes headlines, the gender pension gap remains a critical issue that needs to be addressed and with appropriate measures we can hope to see a future where women and men retire on an equal financial footing.
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