Introduction
As the world celebrates International Women’s Day, it’s once again an opportunity to shine a light on the persistent gap in retirement savings between men and women.
The Current Landscape
More than half of working women are worried about their financial future post-retirement. Ontario’s pay equity office reports that the gender pension gap actually increased from 15% to 18% from 1976 to 2020, with senior women receiving 82 cents of retirement income for every dollar received by senior men. Data reported by recurring surveys and research on women’s compensation tread a well-worn path – some examples:
- There’s a 30% retirement savings gap between men and women (Mercer Retirement Readiness Barometer).
- With four years more life expectancy at age 65, women need to save more (Statistics Canada).
- For every $1 earned by a male worker, a female worker earns 87 cents (Ontario Pay Equity Office).
- Federal tax rules punish women who are temporarily absent from the workforce for maternity leave, child care and elder care with reduced retirement-saving room (C.D. Howe Institute).
Challenges Women Face
For women, the journey through working life to retirement is fraught with unique challenges. Lower savings rates, career interruptions for caregiving responsibilities, and a pervasive gender pay gap collectively increase women’s financial stress and undermine their ability to accumulate adequate retirement savings. Moreover, women are also doing most unpaid domestic labour in Canada which (according to Statistics Canada) has an annual economic value of between $500 and $900 billion, or between 25% and 37% of GDP.
The Role of Workplace Pensions
Workplace pension plan membership is strongly correlated with better retirement income security. With lower compensation, greater responsibility for unpaid work, and longer life expectancy, women in particular need access to workplace pension plans that address their specific needs, including flexibility to accommodate career breaks and designs that recognize their longer life expectancies.
Calls to Action
As every economist knows, pension benefits are deferred wages: you accept lower cash compensation today so that you can have retirement income tomorrow. Compensation equity means more than just pay equity, because workplace pensions are part of total compensation. To close both the gender pay gap and the gender pension cap, all stakeholders need to participate:
- Employers, large and small, need to step up and offer high-quality workplace pension programs – especially now that there are low-risk, outsourced solutions available. With close to 80% of workers willing to change jobs to get a pension plan, offering workplace pensions is just good business sense.
- Policy makers need to advocate for and implement reforms to ensure that fiscal rules governing retirement saving, labour force participation patterns unique to women and the disproportionate burden women bear for unpaid work do not penalize women and prevent them from accumulating the retirement wealth they need to retire well.
- Governments at all levels, policy makers, employers and workers need to commit to policies and employment practices that will definitively close the gender pay gap, so that women will be able to afford to allocate a portion of their salaries or wages to pension saving.
Conclusion
As we work towards a future where everyone can retire with dignity and financial security, enhancing workplace pension coverage is not just a matter of equity; it’s a necessity. On this International Women’s Day, let’s commit to action that empowers women to secure their financial futures, ensuring they can look forward to their retirement years with confidence and peace of mind.
