By Kathryn Fleming, Partner at Hymans Robertson
Let’s take a quick step back through some recent research.
NOW:Pensions and the Pensions Policy Institute highlights the scale of the problem, women in retirement have 72% lower pension income than men and to even this up, women would need to work for an extra 18 years. This is driven by flaws in pension policy, employment inequalities and societal disparities. 3 million women are missing out on workplace pensions because they don’t qualifying for pensions auto enrolment. This is mainly because 5.84 million women are working part time. Why do women typically work part-time? Women on average spend 10 years out of the workforce to look after children, or look after other family members.
So if they do get to save towards a pension, it will be on a lower salary, and lower yet again due to the gender pay gap which is currently around 15.4%. And whilst we are on the subject of finances, 8 out of 10 divorces do not have a pension sharing order, so women lose out on pension assets. Let’s not forget that not only do women reach retirement with less, but they need more! Scottish Widows reported that women spend 10% more time in retirement and are also likely to have an additional year of care needs over men.
What are the policy changes needed?
NOW Pensions, L&G, Standard Life and their peers are supportive of making policy changes to start to close this gap. For example, widening the eligibility criteria for pension auto enrolment and ensuring that the pension contributions are based on all earnings would get more women saving and increase what they are saving. At Hymans Robertson we want to introduce an Auto Enrolment Credit to help mitigate the savings gap from career breaks. With the average annual cost of childcare for an under 2 year old being £7,000 p.a., to allow women back into the workforce sooner and for more time, finding ways to make childcare more manageable also needs policy rethink.
Policy needs to tackle how pensions are treated on divorce, for example, a mandatory 50% splitting of pension assets for the time you were married would shift the starting point of the financial conversation. I also like the idea of introducing a joint pensions account to facilitate household financial planning, it could be automatically split 50:50 on separation or divorce. All of these changes come with challenges and hurdles, but the point is, policy needs to change and as a collective the industry has the appetite to drive this forward.
What can employers do right now?
Policy change takes time and we need to be realistic about the current challenges facing the UK Governments, so we need to look to employers to push forward with change. Flexible working policies can make a difference to any working parent, increasing the likelihood of working full-time over part-time. Paying pension contributions during maternity leave and introducing shared parental leave policies can reduce the gap. Educating employees about implications for their pension any time there is a life point change that may have financial consequences (e.g. reducing hours, getting divorced, promotion etc), employees can make informed choices about whether to top up their pension or not. Let new joiners and part-time workers know that they can opt-in to the pension scheme, even if they do not meet the qualifying criteria, if they choose not to, remind them. If you are already doing this, then what about a gender pensions gap coffee morning – just get people talking and sharing ideas.
We need action, big and small to push for #FairPensionsForAll. What actions do you see having an impact?
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