Seven reasons women have less money in old age

The "gender pension gap" is enormous, and women are at significantly greater risk for poverty in old age. Here are the seven main reasons women have smaller pensions than men.

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The pension gap between men and women is a worldwide phenomenon — and it’s serious. In Europe the difference is an average of 39%. In Switzerland the gap is 37%, in France 39% and in Germany a full 47%. This has dire consequences: Low pensions make it difficult for many women to enjoy a self-determined life, and frequently lead to poverty in old age. Today, in Germany alone, one in ten retired women lives in poverty and, according to a survey carried out by Swiss Life Germany, more than half of all women fear having to live in poverty when they reach that age. The pension gap is a function of one’s professional career. But not only that. These seven factors also play a significant role:

1. They live longer
Women live considerably longer than men. In the developed world, female life expectancy is 82 years, while men can only expect to live to an average age of 76. This means not only that women draw from their statutory pensions insurance six years longer, they are also often obliged to spend six more years making up gaps in their provisions with private funds. In Switzerland and Germany, the remaining life expectancy of women aged 65 is three years longer than that of their male agemates, four and a half years in France.

2. They retire earlier
Although women live significantly longer than men, in some European countries they have a lower statutory retirement age. This means not only that women pay into their retirement provisions less long, it also prolongs the period in which they must live from their pension and savings. In Poland and Austria, for instance, women retire five years earlier (pension age for women 60/men 65), in the United Kingdom two and a half years earlier (women 62.5/men 65) and in Switzerland one year earlier (women 64/men 65).

3. They are less often employed
Women work less often than men. Across the world, only half of women on average are employed, while among men that proportion is eight in ten. In the EU-28, the employment rate for women is 65.3% (men: 76.9%). In Switzerland it is 60.7%, in France 66.8% and in Germany 74.5%. Since in most western European countries pension claims are overwhelmingly based on one’s working life, women’s lesser participation in employment massively reduces their retirement provisions.

4. They more often work part time
Women are much likelier to work part time than men. In the EU around a third of working women are employed part time, compared to just 8% of working men. The proportion of women working part time is particularly high among mothers, who are charged with housework and childcare in most families. In France around a third (36%) of working mothers are employed part time, in Germany more than two thirds (69%). In Switzerland that figure rises to a full 80%, half of whom have less than a 50% workload. This is a major factor in the persistent pay and pension gap. Women in part-time jobs often enjoy fewer opportunities to get ahead and receive particularly low hourly wages. The rate of pension insurance for low salaries, especially in Switzerland, is below average.

5. They often work mini-jobs
More and more people work in the so-called gig economy, or hold mini-jobs. In Germany in 2015, more than 5 million people were employed in “450-euro jobs”, almost two thirds of whom were women. The advantage: fewer work hours per week with equivalent flexibility, which means that children or relatives can still be cared for. When it comes to pensions, however, mini-jobs and small commissions ("gigs") pose a considerable risk, since, as they may not be subject to contributions for social benefits, they threaten a materially secure old age.

6. They earn less
Women earn less than men. The so-called gender pay gap is an average of 16.3% in the EU. (F: 15%, CH: 18%, DE: 22%). This earnings differential is to some extent a structural effect, under the influence of such factors as interruptions in working life, the proportion of part-time employees or gender-specific preferences in choice of career. Women are also in part paid less despite equal qualification. Whatever the causes are, a lower income means less pension and a lower savings rate.

7. They are less financially knowledgeable
Women are significantly less financially knowledgeable than men – which is true around the world and regardless of their age, as shown by various studies performed by the National Bureau of Economic Research. For this reason, women would also be less likely than men to provide for their old age. In addition, in the case of married couples retirement provisions are often associated with the male partner, and it is not until a divorce that women realise how insufficient their pension is.

Gender pension gap: What can be done?

The "gender pension gap" is not a law of nature, and there are sustainable and innovative approaches to narrowing it. To this end companies are called upon to be more active, society needs to change its thinking and women must show greater initiative. 

Read our article series: Fighting the gender pension gap.

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