Need to know:
- The disparity in pensions between the sexes remains huge, with the median pension wealth of women coming up to retirement standing at just one-third of men’s.
- A clean way to help remedy this is to extend workplace schemes to all employees, including those earning under the £10,000 mandated by auto-enrolment.
- A good time to encourage women to think about pensions is at life events such as maternity leave, divorce and going part-time.
There are 50% more women than men heading towards retirement without any private pension savings, according to research published by the Pensions Policy Institute (PPI) in July 2019. Lauren Wilkinson, senior policy researcher at the PPI says: “1.2 million women in their 50s have no private pension and will therefore rely on the state pension, benefits and their partner, if they have one. Even among women approaching retirement with private pensions, savings levels are much lower than those of men. For women in their early 60s, the median private pension wealth is just one-third of men’s. This means that by retirement, the average woman in this age group will have accrued approximately £51,000 compared to the man’s £157,000.”
Not only are women paid less than men, they are more likely to be the primary care giver for children or elderly relatives and are more likely to work part-time, which in itself can reduce capacity for career progression. Divorce is increasing with the childcare generally taken on by the mother. Women are also much more likely to be earning less than the £10,000 cut-off mandated by auto-enrolment. Yet women live for two to three years longer than men on average.
Employers are not necessarily in a position to redress pension inequalities that stem from differences in employment rates and full- and part-time rates between women and men. The biggest step they can take is to extend workplace pension schemes to all employees, not just those earning more than £10,000 as mandated by automatic enrolment, and pay employer pension contributions on employees’ total salary rather than on banded earnings.
“Of 13.4 million employed women in the UK, around 3 million (23%) do not meet the qualifying criteria for automatic enrolment, compared to 12% of male workers,” says Wilkinson. “More women would qualify for automatic enrolment if second jobs were included in the assessment. If the income from both first and second jobs were taken into account for automatic enrolment, then a further 80,000 people (60,000 women and 20,000 men) would meet the qualifying criteria.”
“Quite a few of our members have looked at the women’s issue, such as Nest, People’s Pension, Now and Scottish Widows,” says Craig Rimmer, policy lead, master trusts at the Pensions and Lifetime Savings Association (PLSA). “The government has said it will take steps to implement this important plank of the 2017 Automatic enrolment review by the mid-2020s, and that is coming around soon. There has also been some discussion about tax relief or contributions being paid for carers by the Chartered Insurance Institute (CII).”
Life event communications
Many pension schemes have tried to target women in pensions communications exercises at certain points in their lives such as going on maternity leave, divorce or going part-time. Regarding maternity leave, for example, it may be that the woman can pay less but be able to receive the same level of benefits from her employer. Much more can also be done around education at the point of decumulation, such as the need for a joint annuity for a couple, rather than one based on a single life.
“HR and reward teams are uniquely placed to ask ‘and what will that do to your pension’ anytime an employee is making a life changing decision,” agrees Kathryn Fleming, pensions consultant, partner and actuary at Hymans Robertson. “Give employees access to a really simple tool that lets them change contributions or salaries to show the impact of their choices.”
Digital media methods
In a survey commissioned by Hymans Robertson of employed people, nearly twice as many women than men admitted to not understanding their pension.“Embrace this admission and give women their own forum to ask questions,” says Fleming. “I’ve seen successful female-only pension coffee mornings. Try digital media, such as Youtube videos and TikTok. Tell them what they need to know; such as how to use the Retirement Living Standards to set a target. Twice as many women manage household budgets than men; by building pension savings into this budget conversation women are more likely to engage as it will be familiar to them.”
Steve Cave, director business deelopment at Smith and Williamson, has found that many employees do not understand the State pension. He suggests employers explain to employees how to check the gaps in their national insurance records and what they are entitled to as well as pension tracing and the consequences of previous periods of employment where they may have contracted out of the State earnings related pension scheme (Serps).
“Certainly we find employees are really appreciative,” Cave says. “By understanding some of the basics, they feel more engaged and confident about things like tracking down old pensions and the consolidation of various pensions. One thing we tell them that they often don’t understand is that when the market turns down they have not lost their units in a fund. As soon as they get a toehold, their confidence builds.”