Even in retirement, women earn less than men — almost 20% less, shows new report on pension earnings

Exploring the gender pay gap

In Canada, pension income is calculated from three sources: Old Age Security (OAS), Guaranteed Income Supplement (GIS), Canadian Pension Plan (or Quebec Pension Plan) and private pensions. Two of these three sources are tied to earning power, meaning the pay inequity women experience throughout their careers helps entrench the pension inequity when they retire. According to the report, the gender pension gap (GPG) has not narrowed since 1976. In fact, the gender gap has increased — with women earning $0.85 for every dollar a man earned in 1976, compared to $0.83 earned for every dollar a man earned in 2021.

Canada ranks 12th out of 47 countries in the Mercer CFA Institute 2023 Global Pension Index. In 2021, the Canadian GPG was 17% according to Statistics Canada. According to the Organisation for Economic Co-operation and Development (OECD), the intergovernmental organisation with 38 member countries, founded to stimulate economic progress and world trade, Canada's gender pension gap (GPG) is closer to 21.8%. The average GPG across 34 (OECD) countries was 25.6%, with Estonia the lowest (3.3%) and Japan the highest (47.4%).

In 2021, the average retirement income for Canadian women was approximately $36,700, with the median retirement income for women about $29,700.

This lack of retirement income is most noticeable when compared to the number of retirement-age women living close or below the poverty line. Approximately 200,000 more women, aged 65 or older, were living below Canada's low-income cut-off compared to their male counterparts in 2020. Specifically, 21% of women aged 75 and above had incomes below this threshold — a concerning 51% higher than Canadian men of similar age.

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Factors causing the gender pay gap

The Ontario Pay Equity Office's report reveals the factors that may cause the earning and pension gap with child-bearing and rearing having the largest impact, due to its demand on women's time that results in lost labour force participation. In 2015, the employment rate of women with children under the age of 6 was 69.5%, yet the employment rate of men with children under the age of 6 was 90.8%.

The report also shows that women are more likely to work part-time. In 2021, 24.4% of all Canadian female workers worked part-time, compared with 13% of all male workers. Another factor is how many men compared to women will take time off work based on parental leave coverage offered by employers. In 2017, almost 9 i n10 women (89.9%) of working women with parental leave coverage took maternity leave – making less income during their time off – compared with 11.9% of insured fathers.

While the Ontario Pay Equity Office report focused on the gender pension gap, the report pointed out that the crux of this issue continues to be pay inequity between women and men in the workforce. In 2021, the pay inequity gap was 28% for average annual earnings — with women earning $0.28 less than their male colleagues. In 2020, women earned $0.11 less per hour than their male colleagues.

"Gendered differences in income, whether while working or in retirement, have multiple and interrelated causes,” explained Philp.

Retire with more confidence

To combat pay and pension inequity, there are actions both men and women can take, including:

Paying off your debt

You want as little debt as possible before you lose your income from your job. Any extra money should be funnelled into paying off debts rather than on random spending or splurges. If you have credit card debt, consider a balance transfer credit card with a low (or 0%) interest rate for a few months to help you get ahead.

Good options include:

• MBNA True Line Mastercard
• Tangerine Money-Back Credit Card

Investing with intent

The earlier you start investing, the longer your money will compound and grow. Also, you’ll have time on your side, allowing you to take on a more aggressive investment portfolio and benefit from higher returns.

Here are two ways to start your investment portfolio:

1. Robo-advisor: A robo-advisor is investment platform that uses a ton of data to build a portfolio for you and help your money grow without you having to do much work. Moka stands out in the investment world with its streamlined, effective approach. It's designed for hassle-free investing, automating contributions to the S&P 500, known for its solid average annual return of 10% over 65 years. This makes Moka ideal for those seeking long-term growth based on actively managed portfolios without expensive management fees. In fact, Moka charges a small monthly fee — $15 — and helps you grow your investment through it's rounding up service.
2. Online brokerage: If you prefer to pick investments independently, that’s fine, too, as long as you know what you’re doing. The first thing you will need to do is choose one of the best discount brokerages in Canada. One option is Questrade — considered Canada’s low-cost leader when it comes to DIY investing accounts. Questrade offers no-fee ETF purchases making it perfect for those who want to build a passive portfolio from ETFs or any investor looking to save thousands on fees.

Boosting your savings with a high-interest savings account

Parking your money in a regular savings account isn’t a bad idea, but the interest rate on a traditional savings account could be as low as 0.01% a year — practically nothing. Luckily, there’s a middle ground. High-interest savings accounts (HISAs) pay substantially more than traditional savings accounts, giving the funds you deposit the chance to grow.

Canadians have a lot of high-interest savings account options to choose from. Most financial institutions offer them, but that doesn’t mean all HISAs are equal. The EQ Bank Personal Account currently has an interest rate of 2.50%, and a 4% interest rate when you set up direct deposits. This is one of the best non-promotional interest rates in Canada right now. Not only do you get a good rate, the EQ Personal Account also comes with many more advantages, and very few conditions.

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