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Gender pay gap set to grow in retirement

17 November 2020 10X Investments

Echoing concerns raised by the World Economic Forum earlier this year, 10X Investments’ new South African Retirement Reality Report adds more data showing this worrying trend of women falling further behind men.

10X’s third annual Retirement Reality Report (RRR20) shows that the retirement savings gap between the genders has grown in the last year, not only because the gender pay gap has widened, but because many women continue to reject the best option they have for narrowing the gap, which is investing their money for growth.

RRR20 found that the proportion of women who said they didn’t have a retirement savings plan at all, already significantly worse than for men, had increased to 53% this year from 51% a year ago.

The report, which is based on the findings of a survey that measures the lifestyles of the universe of 15.1 million economically active South Africans, confirms the findings of the two previous reports: South Africa is sitting on a retirement timebomb and women are in a worse position than men in general.

The latest data from StatsSA shows South African women earn approximately 30% less than their male counterparts on average, a seven percentage point increase in the disparity recorded last year.

As we know, this inequality is magnified when women’s careers are interrupted during pregnancy and the raising of children. It is also made worse by the fact that women at retirement age have a higher life expectancy than men, which means they require a relatively bigger retirement pot than their male counterparts.

The RRR20 echoes concerns in a release from the World Economic Forum earlier this year. According to the release: “Even before Covid-19, individuals around the world were on average outliving their retirement savings by 8-20 years; women in particular are at the sharp end of this scale, with longer lives and pension savings around 40% lower than men’s.”

10X’s RRR20 also confirmed that women are more likely than men to be cash savers (32% of female respondents said they saved money, compared with 28% of male respondents), but were significantly less likely to be investors.

This, says Lauren Davids, Senior Investment Consultant at 10X Investments, really compounds the problem because women are effectively rejecting the best opportunity they have of closing the gap with men.

“Investing in a well-diversified, high-equity portfolio and keeping fees low is the most effective way to grow money over the long term, yet only 13% of women said they invested their money for growth, compared with 22% of men,” said Davids.

She added that the problem should not be a concern only for women. “Considering that women make up more than half (51.1%) of the population in South Africa and live longer on average, a problem that affects older women in South African society is a problem for us all.”

The worsening financial picture for women is reflected more widely in the Retirement Reality Report, not just with regards to retirement saving. Three-quarters of women surveyed reported that they were not doing well financially or were not sure how they were doing.

Another change that does not bode well for women closing the gap with men is that double as many men described themselves as doing very well financially this year (4%), while the proportion of women was unchanged at 2%.

The Retirement Reality Report 2020 is based on findings of the 2020 Brand Atlas Survey, which tracks and measures the lifestyles of the universe of 15.1 million economically active South Africans (currently those living in households with a monthly income of more than R8,000) through online completion surveys. The data are weighted to reflect the profile of this universe as defined by Unisa’s Bureau of Marketing Research in their 2019 Household Income and Expenditure report.

The Retirement Reality Report is being released a little later than normal this year because of the arrival of the coronavirus pandemic in the middle of data collection. The data in this report includes the early effects of Covid-19.

More information and the full report is available here: A little reality in a sea of illusion about retirement funding

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