A woman’s pension is 35% less than a man’s, on average. Here’s why and what can be done about it

For Ireland’s current and future workers, the hints that it’s unwise to rely solely on the State pension for retirement have been getting louder. From attempts to raise the pension age, projections for a rapidly ageing population, dropping home ownership rates and the introduction of Ireland’s auto-enrolment pension scheme – the message has been clear: if you want a comfortable retirement, your best bet is to fund it yourself while taking every employer contribution and government tax break you can get on the way.

Yet this could leave nearly half the population vulnerable to even more financial disadvantage. There are a few different numbers on the state of women’s pensions in Ireland and none of them are good. The latest Economic and Social Research Institute findings – from 2019 – puts Ireland’s pension gender gap at 35 per cent. For comparison, that’s more than three times bigger than Ireland’s gender pay gap of 9.6 per cent according to the Central Statistics Office’s latest figures. An Irish Life report found Irish women were “likely to see circa €120,000 less than men on average from their pension pots” based on 2019 data.

That’s a problem when everyone is living longer than ever, especially women in Ireland who have a life expectancy of 85. Outlasting men by about four years.

So why do Irish women end up retiring with less in their pensions than men?

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There’s only one place to start, says Carol Brick, managing director of HerMoney.ie, and it’s with women’s pay packets.

[ Pensions: Pre-2013 public servants have the golden ticket while younger employees pay the price of reforms ]

“That 35 per cent gap is purely based on occupation and private pensions because there isn’t a gender gap in State pensions – everyone gets the same base €280 or so,” she says.

“So those outcomes are based on earnings.”

One of the main things that dictate a person’s earnings outside of salary, says Brick, is years in the workforce, something men are likely to have more of.

“There is research that says 93 per cent of retired men have more than 30 years’ service while only a third of women had 30 years’ service,” she says, labelling the time women take out of the workforce to fulfil socially expected roles as a “stumbling block” to saving for retirement.

“In Ireland, the big thing for women is career interruptions while taking on caregiving responsibilities,” she says.

“Taking a career break to mind family members grossly affects pension entitlements and career progression, with some women coming back part-time and thinking it’s not worth contributing to a pension.”

Compared to other countries, Ireland doesn’t have a strong culture of getting people to save for retirement

By Brick’s estimated figures, a five-year career break to care for children or an elderly family member, for example, could cost a woman €87,694 in the value of her final pension pot at age 65 if she had been contributing €500 a month to a private pension previously.

For Brick, pension-gap wideners like unequal pay at work, lack of flexibility and unfair domestic labour share at home are compounded by Irish women “not being educated appropriately about the significant difference in pension income in later life” when deciding to step back from paid work.

Trend researcher and author of the Future is Female – AIB’s commissioned report on Irish female wealth – Miriam Rayman agrees that women pay a financial penalty for becoming mothers.

“Despite the fact that women are better-educated and advance quite quickly in the working environment, research shows a 27 per cent fall in earnings after childbirth,” she says.

[ Carers to benefit from contributions counting towards State pension ]

Rayman says because women shoulder most of the “social and psychological” weight of the “ongoing issue of childcare costs and shortages in Ireland” it curtails their ability to work longer hours, progress in certain careers and increase their salary (and pensions) at the rates of men.

On top of the hurdles faced at home and work in saving for retirement, Rayman’s report found 36 per cent of women “don’t engage with the financial industry because they have felt patronised, citing the use of excessive jargon as a barrier”.

That’s a lot of things in the way there all right to equalising retirement funds between the sexes. But what are some of the potential solutions?

According to the ESRI, just 28 per cent of women receive a private or occupational pension income compared to 55 per cent of men in Ireland

Compared to other countries, Ireland doesn’t have a strong culture of getting people to save for retirement. It’s currently the only OECD country without an auto-enrolment pension scheme but one is set to come into effect in late 2024. In one of the largest shake-ups to how Irish people will fund their later years, workers earning over €20,000 a year who don’t already have a pension scheme will be enrolled in one. They will kick in 1.5 per cent of their salary in the first year, eventually rising to 6 per cent by year 10 with the employer matching that contribution plus the Government putting in an increasing amount as time goes on. In simple terms, to start out with for every €3 a worker pays in, their employer would pay €3 and the State would top this up by €1. Workers reserve the option to unenroll themselves.

While this should mean more women having pensions and access to employer contribution schemes if they didn’t already – it’s still not enough to close the gap. In fact, there are some aspects of the scheme experts say could widen the disparity.

[ People who work until 70 will get higher pension under change starting in January ]

While John Kearny, a director of Provest Pension Consultants, welcomes the fact that 75,0000 additional people might be helped to save for retirement, women could be let down by two things.

The first is the €20,000 income limit which he says “will more than likely disproportionately exclude women and potentially widen the existing gender gap”, while the second is the “lack of flexibility to increase payments or make lump-sum contributions to cover any periods of unpaid leave or career gaps may result in worse retirement outcomes for women”.

The scheme in its current form doesn’t offer tax relief or increased employer contribution in the case where women returning from a break might need to increase their contributions to make up the shortfall.

Countries such as Australia allow one partner to make tax-exempt top-ups to another’s superannuation when their income drops below a certain level or they take a break or in some cases allows for increased payments up to a set ceiling to make up for the shortfall on the return to work. Which means the blueprint is there for Irish governments to close the gap.

While Kearney praises tax reliefs on Irish pensions he says “the system is rigid and inflexible in how it operates” and “tends to favour those who work full-time and does not particularly support career patterns more often associated with women”.

[ Gender pay gap at Eir stands at 5.5%, down from more than 7% in 2022 ]

As a solution “one potential option would be for the Government to augment or enhance their contribution for those who take such leave”.

But, in the meantime, women can try to mitigate the gap by taking actions within their sphere of control with Kearney stressing the need for women to educate themselves and each other on “the benefits of having a pension plan, the benefits of tax relief, the impact that periods of unpaid leave will have on retirement savings and the downfalls of over-reliance on the State pension”.

According to the ESRI, just 28 per cent of women receive a private or occupational pension income compared to 55 per cent of men in Ireland. Due to compound interest and the way we think about pensions, older women can be discouraged from starting one because “it won’t be worth it”.

While Brick says the ideal time to start a pension is “when you start your first job”, it’s almost never too late to plan ahead.

“If you start at 50 you’ve still got 20 years of funding it at the maximum you can,” she says.

“With pensions, it’s the earlier the better but if you get to 50, it’s not the end of the world because people are sometimes just starting over at that age. For example they are now empty nesters with more money to put into schemes now the children have left home.”

Finally, like Rayman and Kearney, Brick recognises it may take a three-pronged approach between employers, the Government and individual actions to solve the pension gap.

Citing increased childcare infrastructure and workplace flexibility as things to be improved to keep women at work and paying into pensions, Brick stresses women need to research their options.

“It’s really scary how unaware people are of the huge tax relief around pensions,” she says, adding that women “might not go part time if they were fully informed” by employers and their families of how their choices to juggle family and career impacted their ability to retire in comfort.