Closing the Gender Gap in Retirement Savings: A Call to Action

In a world where gender equality is increasingly at the forefront of social discourse, one critical area remains starkly divided: retirement savings. Recent studies and reports, including findings from the Organization for Economic Cooperation and Development (OECD), demonstrate a concerning depiction of the gender disparity in pensions, emphasizing the urgent need for policy intervention and societal change.

The OECD's report reveals a troubling reality: across its member countries, the difference in retirement savings between men and women stands at 26%. However, this gap is not just a number—it's a reflection of deep-seated societal, employment, and policy issues that disproportionately affect women's financial stability in their later years. Factors such as career interruptions for childcare, lower average salaries, and longer life expectancies combine to create a unique set of challenges, leaving many women more financially vulnerable as they age.

In Canada, this issue is especially pronounced. National surveys like the Financial Comfort Zone Study, indicate that Canadian women are at a higher risk of outliving their retirement savings than men. According to a 2018 analysis of Statistics Canada databases, older women encounter a low-income rate of 33%. This figure starkly contrasts the mere 8.7% among elderly economic families, underscoring a glaring economic divide.

Further exacerbating this issue is the gap in financial literacy and confidence. Statistics Canada's research demonstrates that only 31.4% of Canadian women consider themselves financially knowledgeable, compared to 43.2% of men. This gap in self-perceived financial incompetence is mirrored in actual financial literacy rates. This self-perceived financial incompetence is reflected in actual financial literary rates, with only 14.7% of women  answering financial literacy questions correctly, as opposed to 21.5% of their male counterparts. As these findings continue to surface, there is a pressing need to re-evaluate current financial education and retirement planning approaches, particularly for women who face increasing risks in the current economic landscape.

So, what actions can be done? Both the OECD report and Canadian studies suggest several key actions. Firstly, there is a need to increase the availability of retirement savings arrangements in industries predominantly employing women. This approach could help bridge the gap created by sector-specific disparities. Additionally, relaxing eligibility requirements for retirement savings plans could significantly benefit women, especially those who work part-time or non-linear career paths. There is also a need to shift communication strategies around retirement savings. Tailoring these strategies towards women, emphasizing the importance of saving, and providing flexible contribution options could go a long way in raising awareness and participation.

However, it's not just about participation; it's also about investment behavior. Studies indicate that women, on average, tend to exhibit less tolerance for risk  in their investment portfolios. This tendency may lead to comparatively lower returns on investments over time. Addressing this issue requires educating women on the benefits of diversified investment and the importance of non-conservative investment options in retirement savings plans, tailored to accommodate women's longer life expectancies. Financial education for women is another key factor in bridging gaps.

Nevertheless, there is also a positive aspect to consider; data suggests that women are more likely to participate in Registered Pension Plan (RPP) and Registered Retirement Savings Plan (RRSP) programs than men. However, this increased participation, a notable stride in financial engagement, is counterbalanced by a tendency towards a secure approach in non-RPP and non-RRSP investments. Therefore, to optimize the financial well-being of women, especially in their retirement years, financial education policies should extend beyond mere participation. There is a crucial need to focus on broader aspects like asset allocation and risk management, ensuring that women are not just saving but also effectively growing their retirement funds.

The role of policymakers in this equation is crucial. By tailoring financial education to emphasize diversified investments and risk management, policymakers can help to close the gender gap. Policymakers can also modify retirement plans like RPPs and RRSPs to accommodate women's longer life expectancy and varied career patterns, including options for catch-up contributions.

Addressing the gender disparity in retirement savings requires a multifaceted approach that encompasses policy changes, targeted education, and industry-specific interventions. By implementing these measures, we can strive towards a more equitable future where individuals of all genders can enjoy financial security in their retirement years. It is not only a matter of economic fairness but a step towards building a society that values and supports the diverse financial needs and aspirations of every individual, regardless of gender.

Arden (she/her) is a second-year Economics student at Queen’s and a Lower Year Intern at Political Digest.