The global gender retirement gap and its regional impact

A comfortable retirement is a key concern for women globally, with more women than men worried about having enough assets for retirement.

Similar to the global trend, women in the Middle East will likely face greater worry about having enough money for retirement compared to men.

This concern is valid due to existing disparities. While specific data on the pension gap in the region is not readily available, the 2022 WTW Wealth Equity Index highlights that women in the Middle East and Africa are expected to accumulate 71 per cent of the wealth men have by retirement, compared to the global average of 74 per cent. This puts them at a disadvantage compared to men and other regions such as Europe (77 per cent) and North America (76 per cent).

While identifying the drivers of the pension gap is a complex undertaking, there is a direct link between earning less and making smaller contributions to a pension pot. A big divergence in terms of pay emerges in the childbearing years. According to a report by LeanIn.org and McKinsey, women find it hard to get their first promotion from an entry-level position to manager. That early “missed promotion” holds women back for the remainder of their careers.

Gender pay gap

Harvard University professor Claudia Goldin – a Nobel Prize winner for her research in women’s labour – wrote that the gender pay gap is underscored by “greedy jobs” that pay disproportionately more money, but require a high commitment to working hours. Women typically devote more time to childcare and housework, and this leads the pay gap to widen. This unequal allocation of unpaid work constrains women’s career choices, income, and professional advancement. As a result, many women feel overstretched and are more likely to take up part-time work, which often leads to career stagnation and pension gaps because of smaller contributions.

On a positive note, flexibility both in terms of location and working hours is helping women stay in their roles. According to McKinsey, one in five women cite flexibility as helping them stay with their employer or avoid reducing hours.

Another important consideration regarding pension allocation and savings for retirement is that women face a higher probability of retiring early, either by choice so that they can retire alongside an older spouse or due to health. Menopause is a period in which many women are forced to reduce employment or take time off. For many women, returning to work may prove challenging and could force them into an early retirement. Based on a 2022 study by The Fawcett Society, one in 10 women in the UK have left a job directly due to menopause symptoms.

Furthermore, women on average live longer than men and they also tend to have higher rates of chronic conditions. That means they need to fund more years with higher medical costs.

Read: What you should consider when planning your retirement

A robust financial plan to support retirement

All these factors highlight the need for women to have a solid financial plan and invest appropriately to get the best possible chance of meeting all their lifetime goals. However, women on average tend to be more conservative in terms of their investments. Financial confidence is very closely associated with risk toler¬ance, which in turn depends on risk perception. Recent research has confirmed that being more familiar with risk is associated with reduced risk perception, making this an important aspect. Men tend to be more exposed to conversations about investing, even from a young age. It is therefore crucial for women to get experience in the world of investing and gain more confidence as a result.

Based on a survey by Fidelity International, only 9 per cent of women expect their gender to be able to outperform men in financial markets. This startling statistic is contradicted by research that indicates women make better investors than their male counterparts. For example, a recent study by the Warwick Business School concluded women outperformed men in investing by 1.8 per cent per annum. Reasons for this include that women trade less often, incurring smaller costs, with data from Vanguard highlighting that men trade twice as often as women do.

Also, women check their portfolios less frequently than men, which could also explain why they are less likely to sell at market lows. Data suggest women are around 25 per cent less likely to withdraw their investments than men during major drawdown events. Women are in general more disciplined and invest in line with their goals, while they are less likely to try to time the market.

In a world where gender gaps persist, women can at least partially offset such gaps with a sound investment approach. For many women, investing appropriately may be imperative to allow for a comfortable life and a high probability of meeting their objectives.

We should take the opportunity to increase awareness around the importance of financial empowerment and bust any pre-existing misconceptions about women’s abilities as investors.

The writer is the head of Advice Beyond Investing at UBS Chief Investment Office.