Confronting Inequality in the UK Pension System

In his previous article, Anthony Royd exposed the scandal of UK state pensioners living in dire poverty, receiving only half the income needed for an adequate standard of living. He also explored international strategies for achieving sustainable and equitable pensions.

This week, Anthony Royd examines the deep-seated inequities in pension provision across demographic groups. He investigates the key factors driving significant disparities, particularly those affecting women, ethnic minorities, and single parents.

In the UK, retirement pensions exhibit significant inequalities that disproportionately affect certain demographic groups, particularly women, ethnic minorities, and single parents.

The disparities in pension wealth are alarming, with private pension income for women being only 64% of the population average. For ethnic minorities, this figure is even lower at 62%.

Additionally, divorced women and single mothers face even greater challenges, with private pension incomes at just 55% and 50% of the average respectively.

The pension disparities in the UK are due to social and economic factors, with significant impacts on women, ethnic minorities, single parents, poverty-affected individuals, and those with health issues.

The gender pay gap is a significant driver of pension inequality. Women generally earn less due to occupational segregation and hiring discrimination, resulting in an average 35% lower pension contributions over their careers.

Employment Patterns: Women often take career breaks for caregiving or work part-time, reducing pension contributions and leaving them with lower retirement savings than men with continuous employment.

Impact of Unpaid Work: Unpaid caregiving limits women’s labour market participation, affecting both immediate earnings and long-term pension contributions tied to paid employment.

Economic Impact: Gender inequality in the workforce, largely due to caregiving responsibilities and bias, costs the economy an estimated £100 billion annually.

Ethnic minorities face pension disparities due to:

Self-Employment: Many are self-employed, often missing out on workplace pensions.

Awareness: Lower awareness of pension options due to cultural and informational gaps.

Employment Patterns: Higher representation in low-paid jobs with limited access to pensions.

Income Inequality: Persistent income gaps reduce their ability to save for retirement.

Single parents encounter unique pension challenges:

Income Constraints: Single incomes limit retirement savings potential.

Employment Flexibility: Part-time work for childcare limits access to employer pensions.

Pension Gaps: Single mothers especially face significant pension gaps due to career interruptions.

Pre-Retirement Poverty hinders pension provision broadly:

Low Savings: Immediate financial pressures prevent low-income individuals from saving.

State Pension Reliance: Many rely on the state pension alone, so they are living in poverty, as revealed in the previous article.

Intergenerational Effects: Poverty limits financial literacy and future savings among children from low-income families.

The government has estimated that 4.3 million children, or 30% of all children in the UK, were living in relative low-income households after housing costs in 2022/23.

Health challenges impact retirement savings:

Employment Disruption: Chronic illness and disability often reduce earning potential and pension contributions.

Mental Health: Financial planning can be difficult for those with mental health issues.

Healthcare Costs: High medical expenses divert funds from retirement savings, especially for older adults.

In summary, inequities in UK pension provision manifest through various channels affecting ethnic minorities, single parents, those living in poverty, and individuals facing health challenges.

Addressing these disparities requires targeted policy interventions aimed at improving access and awareness of pension schemes while considering the unique circumstances faced by these groups, or Is It Me!

Join Anthony Royd in the next instalment as he outlines the core principles—Justice, Equity, Adequacy, and more—that must guide the UK’s pension reform to create a fair and sustainable system ensuring retirement security for all.