As Head of Retirement Germany at WTW, Hanne Borst deals with pensions daily, especially occupational pensions. She is writing a guest article for Fondsfrauen on the topic of the pension gap.
Due to their lower income, women are significantly more at risk of poverty in old age than men. This is evidenced by the European Union Statistics on Income and Living Conditions (EU-SILC).
What is behind the so-called Gender Pension Gap?
The Gender Pension Gap is an indicator of gender equality. It describes the relative difference in retirement income between men and women aged 65 and older. It is also referred to as the "gender-specific pension gap." According to the latest data from the German Federal Statistical Office, the Gender Pension Gap in Germany in 2023 was 39.4%. Even when taking survivor benefits into account, the gap still stood at 27.1%. In monetary terms, the average retirement income for men in 2023 was €25,559, compared to €18,663 for women.
What are the reasons for women’s lower retirement income?
1. Women earn less than men: The Federal Statistical Office regularly publishes data on the wage gap between men and women. In 2023, this pay gap was 18%. Even when accounting for the fact that women often work in lower-paying industries, professions, and job levels, the wage difference in 2023 was still 6%. This means that women with comparable qualifications, roles, and career histories earn 6% less per hour than men on average.
2. Women work part-time more often:In addition to wage differences, women on average work fewer hours per week and are more frequently employed in non-social security jobs (mini-jobs). In 2021, according to the Microcensus, 47.4% of employed women aged 15 to 64 worked part-time, compared to only 10.6% of men in the same age group.
3. Women interrupt their careers more frequently: Women also tend to interrupt their employment more often and for longer periods, typically to take on caregiving roles, such as looking after children or caring for relatives. This situation is exacerbated by a lack of childcare options. According to the Bertelsmann Foundation, there was a shortage of nearly 400,000 childcare places in Germany last year.
4. Women live longer than men: Women live an average of 5 years longer than men, according to the Federal Statistical Office. This means that any retirement savings must last longer than those for men. Additionally, survivor benefits are usually significantly lower than regular pension income, leaving women with a further gap to bridge.
5. The pension system is focused on employment: Because the pension system is geared towards employment, women's career paths often result in relatively lower independent pension income. Income differences between men and women accumulate over a lifetime, as retirement income reflects the earnings over the entire working phase. This applies not only to state pensions but also to occupational and private pension schemes.
Companies are increasingly recognizing the Gender Pension Gap as a key issue!
According to surveys by WTW, the competition for skilled workers is one of the key issues for companies. Stepstone analyses indicate that the average time between a job being advertised and filled is around 100 days. The average opportunity cost of an open position is approximately €30,000. With nearly 50% of employed women working part-time, there is significant potential in reducing part-time rates and thus filling vacant positions.
As a result, companies are increasingly implementing comprehensive Diversity, Equity, and Inclusion (DEI) strategies that specifically promote part-time women. Additionally, more companies are offering financial education programs to their employees, making it clear what impact part-time work and parental leave have on individual retirement situations and how, for example, pension sharing in the event of divorce works. Many companies are also working to implement the European Union's pay transparency regulations—another significant opportunity to reduce the Gender Pension Gap!
Under this author name you will find guest contributions from various people that we publish on their behalf.