The average gender pension gap has reached 40% in the EU as experts are warning the long-term effects can lead to women retiring in poverty. Businesses and governments are under pressure to address the pension gap as under-representation in the EU could lead to many women facing extremely low pension prospects compared to men.
“Not only an urgent challenge for governments and policy makers, the pensions gap should also be front of employers’ minds,” said Mandy Schreuder, Diversity and Inclusion (D&I) consultant at Mercer. “Women live longer, but with lower levels of savings they face a higher risk of retiring into poverty than their male counterparts.”
Mercer is urging companies to target more women directly, as they are at a significantly higher risk of losing out as they get older due to making career sacrifices in order to raise a family.
“The gender pay gap may be a hot topic at the moment, but few of us consider the impact it has, in combination with career breaks, on the financial wellness of women in retirement,” continued Schreuder. “Coupled with an ageing Europe workforce this challenge will be highly relevant to companies over the coming years.”
Most pension schemes across the EU are linked to an employee’s income, giving less pension opportunities to those with lower income. Though some company plans try to bridge the gap, Mercer’s research shows that less than 10% of organisations offer retirement or savings programmes customised to different working patterns.
Women have also been found to be less likely to invest in schemes than their male counterparts, with many acting much more cautiously about investing money in a fund than men. As women workers are 62% more likely to invest in funds with lower levels of growth, Mercer believes companies aren’t engaging with women workers.
“We have found that benefits communication that is based on a woman’s individual circumstances is more likely to get her attention and to subsequently take positive action,” continued Schreuder. “Personalising the message and using language that is more engaging for women could help them make investment decisions that produce higher long-term returns that are more aligned with their needs and ambitions.”