Here’s why saving for a comfortable retirement is more difficult for women, Disabled people and people from minority ethnic backgrounds

The ability to earn, save and pay into a pension while managing outgoings is at the heart of preparing for a life after work. We all hope that we will have enough money to ensure a good standard of living in retirement.  

But our State of Ageing 2023/24 report highlights the inadequate pension provision and low levels of savings that put many people at risk of financial insecurity and even poverty in their later lives.  

Labour market inequalities across the life course play a key role.  

They mean that some groups have lower than average employment rates, are more likely to be self-employed, to have fragmented work histories, precarious work and fewer working hours and to experience pay gaps linked to their ethnicity and/or gender.  

All of these can lead to lower than average pay which in turn impacts ability to save, including into a personal or private pension, and determines whether the auto-enrolment threshold for workplace pensions is met. These factors also impact national insurance contributions with a knock-on effect on the amount of state pension received.  

Certain groups are most susceptible to workplace inequalities. These include: 

• Older women who bear the consequences of fewer working hours and fragmented work histories across the life course due to caring first for their children, and later for other adults: almost one in five (20%) 55-59-year-old women act as unpaid carers. In addition, the gender pay gap (with men earning 8% more in hourly earnings on average than women as of April 2023) has been a factor for most women in the workplace.  
• Disabled people and people with long-term health conditions who are more likely to be out of work than the population in general. Sickness, injury or disability is the reason most commonly given by people aged 50-64 for being out of work but almost four in ten of these would like a job. So, while many are unable to work, some are prevented from doing so by disablism and working environments that don’t accommodate them.  
• People from minority ethnic backgrounds who suffer multiple disadvantages in the labour market, because of both direct discrimination and indirect, structural factors, such as poor neighbourhoods, that create and maintain disadvantage. For example, people from minority ethnic backgrounds are more likely to be employed in “non-professional” occupations with lower pay; are more likely to experience more and longer periods out of work (the employment rate of 50-64-year-old Bangladeshi men [65%] is almost ten percentage points lower than average for this age group [74%]); and they are subject to the ethnicity pay gap (women of Bangladeshi, Pakistani, and Mixed White and Black Caribbean heritage are paid 14.7%, 11.8% and 10.6% less respectively, than White British women). It is also the case that people from Pakistani, Bangladeshi and Asian groups are more likely to be self-employed and self-employment is particularly correlated with low rates of pension provision because auto-enrolment duties don’t apply.  

Sexism, racism and disablism clearly play a role in labour market inequalities across the life course.  

But we can also consider the impact of ageism on older workers themselves. Once out of the labour market, it is much harder for older workers to get back in because of persistent ageism and working conditions that are not suited to the needs of older workers.  

People in this situation are therefore at risk of falling into poverty in later life, their income having dried up with many years still to go until they can collect their meagre state pension. This is particularly relevant now because of the large numbers of older workers who fell out of work during the COVID-19 pandemic with employment levels of people aged 50-64 remaining lower than before March 2020. 

Historically, rising employment for working-age adults was one of the keys to declining levels of pensioner poverty. Therefore, interventions to address worklessness among people in their fifties and sixties are essential.  This should include back-to-work support tailored specifically for older workers and age-friendly workplaces that support longer working lives. 

We can also reduce the impact of labour force inequalities across the life course by lowering both the age and lower earnings threshold for auto-enrolment into workplace pensions, which currently stands at 22-years-old and £10,000 per year, thereby nudging lower earners to accrue pensions savings.  
 
We should also be providing the means that adequately allow for people with caring responsibilities to work flexibly. From next Saturday [April 6], employees will be entitled to take up to one week of unpaid leave every 12 months to give or arrange care for a dependant. At Ageing Better we welcome this progress but we would like to see this taken further in the future, with all workers given access to ten days’ paid carer’s leave and up to six months’ unpaid carer’s leave if needed. This would better equip those with caring responsibilities to balance work and care and ultimately stay in work for longer, where desired or necessary.  

We need workplaces that accommodate people with disability or long-term health conditions so that people can remain in the workplace, earning and saving for the future. Finally, we need a national race equality strategy that addresses the structural factors that trap people from minority ethnic backgrounds in poor work with low pay.  

With an increasingly diverse older population, growing health inequalities and a state pension which doesn’t provide even a minimum income standard in retirement, levels of pensioner poverty and inequalities within the pensioner population are at risk of increasing in the future unless action is taken.