During a House of Commons debate last month, Patricia Gibson, Scottish National Party MP for North Ayrshire and Arran, noted that the gender pension gap "stands at a shameful 40.3% - more than double the gender pay gap of 17.3%."
A recent report by Barnett Waddingham considers the gender pension gap and what can be done about it.
The report notes that the driving force behind the gender pension gap is the gender pay gap but other factors include:
- An imbalance of women in lower skilled / lower paid occupations
- Women are more likely to be on zero hours contracts or working multiple part time roles so not reaching auto enrolment thresholds
- Low levels of default contribution rates generally
- Limits of some employers’ support to help offset the effect of career breaks
- Family constraints and caring responsibilities typically result in less flexibility for women to progress in their careers
- Increasing rates of divorce, particularly in later life
The report looks at what individuals, employers and policy makers might consider to address the gender pension gap. In broad terms suggestions include:
Individuals - pay in more; work longer before retiring; and, for parents, be more active in sharing parental leave.
Employers - setting higher contribution levels; auto-escalation; improving pay and benefits during and after career breaks; and introducing more targeted financial education.
Policy makers - reviewing auto enrolment rules; reviewing state pension provision; moving to a flat rate of pension tax relief; and encouraging the industry to design default investment funds better suited for women.
The design of defined contribution default investment funds is an area where trustees can have an impact. Employers choosing default auto enrolment arrangements also have a role to play. The report notes that the use of alternative assets such as infrastructure which provide stable and longer term returns without the need to de-risk may be more suitable for those having less regular contributions and an unknown retirement date. We have commented on infrastructure as a long term investment for pension funds and whether clearer opportunities are needed as part of our recent series Perspectives on infrastructure.
In his response in the House of Commons debate the Minister for Pensions and Financial Inclusion Guy Opperman noted that the government remained committed to addressing the gender pension gap. He highlighted (amongst other things) that the government is committed to implementing the findings of its automatic enrolment review by the mid-2020s and noted that the Treasury is continuing to analyse the responses to the government's call for evidence on pensions tax relief administration. He accepted that there "is more to do and that closing the gender pension gap remains a priority for all."
Whilst there is general agreement that the gender pension gap is too big, there is little evidence of serious steps or concrete policies to tackle it in the immediate future. This report by Barnett Waddingham provides welcome food for thought.
Women’s retirement savings are the victim of shortcomings in the fairness of pension frameworks and workplace imbalances...the system is intrinsically biased towards men, creating a stark disparity in wealth at retirement.