Women at risk of poverty in retirement

Irish women typically retire on incomes that are more than 30 per cent lower than their male counterparts, a new report from Mercer reveals, as it calls on governments, policy-makers and employers to respond to the “urgent challenge” the pensions gap poses.

According to the report, half of European Union states, including Ireland, have pension gaps of 30 per cent or more, while the EU average is 40 per cent.

The gap means that a retired woman living in the EU will receive, on average, 40 per cent less retirement income than her male counterpart.

The gap varies widely from one member state to another, ranging from 4 per cent to 49 per cent, and is narrowest in countries like Denmark and Latvia (0-10 per cent), and highest in countries like Germany and the Netherlands (40-50 per cent). In contrast, the average gender pay gap, or the difference between what a woman and a man will earn while in paid employment, is considerably lower, at 16 per cent across the EU, or 15 per cent in Ireland.

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‘Triple bind’

"Women face a triple bind of lower earnings, more gaps in service and longer life expectancy – all of these factors mean that women have to draw from a smaller pool of assets for a longer period of time in retirement," said Mairéad O'Mahony, head of DC and financial wellness at Mercer Ireland.

Part of the problem lies in how pensions are currently structured. Most Irish pensions systems are income-linked, which means that those earning less, working part-time or taking career breaks to care for children or older family members accrue less pension.

“Most retirement plans are designed for a 40-year-long, continuous, full-time career with few breaks, and do not reflect women’s divergent needs. Companies should review their benefits plans and communications through a gender lens to ensure they address the specific issues and needs of the female workforce,” Ms O’Mahony said.

Another issue is risk aversion, with women tending to display less confidence when making financial decisions .

“The root causes behind women’s risk aversion and lack of financial confidence are multi-dimensional and complex, but action-orientated financial education should be at the heart of the solution,” said Ms O’Mahony.