Pensions - Articles - 5 things for policy makers to close the gender pensions gap

New research from Barnett Waddingham finds that women are far more likely to be relying on a state pension in retirement than men – raising concerns about women’s financial stability in later life.

 • Three tenths (30%) of women do not have any private or workplace pensions, and will receive a state pension only at retirement, almost double the amount of men (17%) in the same position – showing that women have less savings and are less prepared for a financially stable retirement.
 • The pensions gap widens even more, later in life. Almost two fifths (38%) of women over 55 will rely on a state pension only, compared to 17% of men over 55.
 • The study shows that auto-enrolment is having more of an impact on younger workers, with 59% of millennial women (age 25-34) holding a workplace or occupational pension – more than the 58% of millennial men who do so.
 • But it’s after the age of 35 that the pensions gap begins to diverge. By ages 45-54, 14% more men than women hold a workplace pension, at 67% compared to 53% - suggesting that auto-enrolment stops being as effective for women in mid-life, perhaps as a consequence of parental responsibility leading to part-time or lower-paid work.
 Amanda Latham, Policy & Strategy Lead at Barnett Waddingham, commented: “The findings of our research are stark; women are twice as likely than men to be walking into retirement with insufficient funds. For many, a state pension alone is simply not enough to cover the costs of a comfortable retirement. Without the additional support of a private or workplace pension, people could face financial instability in later life or a total change in lifestyle. While auto-enrolment is getting more younger women on the path to retirement savings, women in mid- and later-life are more likely to be disadvantaged. For example, our previous study into the gender pensions gap found that women taking a career break to have children are more likely to fall behind and end up with less in their pension pot at retirement.
 “To turn the dial and close the gender pensions gap, we need to be overhauling the UK pension system which is intrinsically biased towards men. Policymakers and employers need to think about how to introduce measures that will target women who are not topping up their pension at crucial stages of life – whether it be reviewing auto-enrolment rules, or encouraging employers to improve pay and benefits during and after a career break. It may not be enough to simply strive for equal treatment within the pensions system. Instead, we should be thinking about how to create a more fair, robust and inclusive framework that gives everybody the best chance at building financial security for retirement in a targeted way.”
 Here, Amanda Latham shares, shares five things that policy makers should do to close the gender pensions gap:
 Of course, careful consideration of any possible trade-offs and possible disadvantages of other socio-economic groups is needed before effecting any of these changes.
 1. Review auto-enrolment rules
 It is clear that the auto-enrolment minimum threshold impacts women more than men. The government should review this in the context of gender. Whilst there are proposals to remove the minimum earning requirement, this should be done sooner rather than later.
 Increase minimum level contributions. People typically anchor to the default level of contribution when joining a pension plan, which is generally impacting women more than men. This again should be reviewed in the context of gender, and done so as soon as possible.
 Remove the upper age band for pensions auto-enrolment.
 If not removing the lower earnings threshold, auto-enrolment rules should consider income from multiple jobs, not just one job.
 2. Review State Pension provision
 This is to make sure it better reflects career breaks, and periods of being ineligible for auto-enrolment (if the minimum level of contributions remains). Provide more education on how to assess your State Pension – i.e. the people most affected may be the ones less able to access this information. Start with better financial education in schools.
 3. Move to flat rate of pension tax relief
 The current tax relief system benefits higher earners more than lower earners, which typically benefits men more than women. Moving to a flat rate will help women save more; e.g. moving to a tax relief flat rate of 30% will typically increase a women’s total amount of pension savings by 35%.
 4. Collect data on people identifying as trans or non-binary
 We know the evidence base on inequality of employment outcomes by sexual orientation is weak and inconsistent[1] and that what is measured is what matters when we look to create change. To meaningfully develop a system that works for everyone, data needs to be collected and reported to understand progress and the impacts of policy changes.
 5. Allow couples to pay into each other’s pension plans
 This will allow pension benefits to shared more equally and will allow both parties to take advantage of the incentives to save for retirement; i.e. tax savings. Consideration should also be made to allow couples to transfer assets between each other’s pension plans.
 [1] National LGBT Survey, 2019.

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