The gender gap in retirement pensions

by Alex Musk

The well-known gender gap is also suffered in pensions, causing the average public pension for women to be more than 30% lower than that for men.

Social Security data for August 2021 indicate that the average pension for women throughout the system was €833.40/month, while that for men amounted to €1,257.15/month. If we only talk about the retirement pension, men earn an average of 33% more than women, specifically €1,371.82 per month for women’s €918.08.

This is a consequence of shorter careers for women, a higher proportion of part-time employment, and a lower level of general remuneration.

Gender differences in the workplace have decreased in recent decades, and a progressive reduction in the gender gap in pensions can be expected, although if we are honest, we are still a long way from achieving full equality between men and women in the labor market.

The gender gap, according to coverage.

The results of the European survey (SHARE) indicate that the gender gap in terms of coverage in Spain affects the three pillars in the following way:

1. To the first pillar of the pension system, that is, to the public system of contributory pensions, in terms of coverage.

The lower number of retired women with contributory pensions.

2. In the second pillar, constituted by private employment pensions, there is hardly any coverage gap since employment pension systems are still poorly implemented within companies, and in Spain, they must comply with the non-discrimination requirement.

The third and last pillar of private savings plans offers us a balance slightly tilted towards women; that is, there are more female participants, although the difference is insignificant. This difference indicates women ‘s awareness of the need to supplement a public pension that will be clearly lower than that of men on average.

The gender gap according to the amount of retirement pension received

The gender gap in pensions is greater than the wage gap between the active population. However, the latter also represents a significant percentage: the wage gap in Spain stood at 19.5% according to the latest data published by the Institute Statistics in its latest Salary Structure Survey, 19.5%, which will have its future effect on contributory pensions received by women.

If we look at the amounts of new retirement pensioners, we might think that the incorporation of women into the labor market would reduce the gap significantly; however, the difference is almost 25%. Therefore, the gap in pensions is being corrected, but it is still very large.

Average retirement pensions for new hires in August 2021 (age >=65 years)

Private supplement to retirement

There is no doubt that the gender gap in women’s retirement pensions will take time to be eliminated if it can be done, which makes women even more aware of the need for a private supplement that compensates as much as possible for the difference in your public pension.

In fact, we can already see this concern reflected in the number of private savings plans contracted by women, higher than that of men, as we have previously commented.

Saving in the long term makes it possible to build a guaranteed capital for retirement without great economic sacrifices, the constancy in saving early will make the “magic” of compound interest work, and the correct tax planning will provide us with additional savings in our annual personal income tax return.

Longer life expectancy for women

Life expectancy has increased systematically in all advanced societies over the last 150 years. In Spain, if we look at demographic trends, we can expect women to live approximately four years longer than men when they reach 65 years of age.

Life expectancy at age 65 (INE)

Men = 83.36 years

Women = 87.33 years

The increase in life expectancy is directly reflected in the number of pensioners that are growing unstoppably and who are waiting for the retirement of the baby-boom generations.

The effect on the pension system is evident: we will have a large number of new pensioners who will live longer, burdening the system with expenses associated with dependency.

Is the widow’s pension as we know it going to disappear?

Widow’s pensions were conceived as a protection of the system at a time when women were financially dependent on men. Many of the current widow’s pensioners live on that pension, but these widow’s pensions as we know them could undergo reform to adapt them to cover situations of need.

Once reformed, they will no longer supplement the income of women in their retirement, assuming another drop in average income for the group (because they are the ones who normally outlive men), which must be compensated through private legitimate insurance  savings.

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