Gender Pension Gap Widens as Women Lack Awareness of Tax Benefits

As International Women’s Day approaches, a significant disparity in pension awareness and savings between men and women in Ireland has come to light. New research reveals a substantial gap in knowledge regarding pension tax benefits, contributing to a widening gender pension gap.

Pension Knowledge Disparity

A survey commissioned by Aviva Life and Pensions found that 65% of working women are unaware of the tax benefits associated with private pensions, compared to 44% of men [1]. This lack of awareness impacts women’s financial security in retirement.

How Pension Tax Relief Works

Individuals who contribute to a pension receive income tax relief on their contributions, based on their highest marginal tax rate. For those in the 40% tax bracket, a €100 contribution only costs €60. Standard rate taxpayers receive 20% relief. It’s important to note that there is no PRSI or USC relief, and relief is capped by age-related percentages of earnings.

Anxiety and Confidence Levels

The survey as well indicated that just over half of women (58%) perceive anxious when considering the end of their paid working lives. 58% of female respondents admitted they don’t know what their pension is invested in, a figure significantly higher than the 39% of men who share the same uncertainty [2].

Factors Contributing to the Gap

Several factors contribute to this gender pension gap. Women are more likely to work part-time and often take on unpaid care responsibilities, hindering their ability to consistently contribute to pension schemes. Aviva estimates a national gender pension gap of 31%, meaning women would need to work an additional 10 years to achieve the same retirement savings as men.

Four Interconnected Gaps

Aviva identified four key areas contributing to the financial disadvantage women face as they approach retirement:

• Pension Behaviours: Women typically earn less, start pensions later, and take more career breaks.
• Knowledge Gap: A lack of understanding regarding pension benefits and investment options.
• Advice Gap: Limited access to professional financial advice.
• Confidence Gap: Lower confidence levels in making investment decisions. Only 29% of women feel confident about investment decisions, compared to 53% of men.

Delayed Savings and Limited Awareness

The research shows women are almost twice as likely to delay starting pension savings until age 50 or older. This delay significantly reduces the time their savings have to grow, exacerbating the 31% gap. Awareness of retirement income products like Approved Retirement Funds (ARFs) and annuities is also lower among women, limiting their ability to make informed decisions.

Aviva’s Commitment to Equity

On International Women’s Day, Aviva Business highlighted its commitment to diversity, equity, and inclusion [3]. Clair Carroll, Head of Corporate Distribution at Aviva Life and Pensions Ireland, emphasized the need to address these interconnected gaps to improve women’s financial outcomes in retirement.