Simon Moffatt: Would more flexible parental leave end reward inequality?

The government’s Modern Workplaces consultation on plans to introduce a new system of flexible parental leave from 2015, enabling both parents to share some of the statutory time out, will provide a more flexible foundation for both parents to share childcare duties while maintaining their careers and earning power.

It also potentially provides a route to end one of the great unaddressed reward inequalities that affects the UK’s population – the pensions gender gap. Prudential’s Class of 2011 survey, published last month, revealed that the average UK woman retiring this year will receive £6,500 a year less than the average man – a huge income gap and one that broadly reflects a lower level of pension savings by women compared with men.

Women have traditionally dropped out of workplace pension schemes during career breaks taken to raise children, and have consequently stopped paying national insurance contributions which help boost the state second pension element of retirement schemes.

This double hit means that many women are now retiring with considerably lower pension savings than men. A more flexible approach to parental leave, combined with women topping up their national insurance contributions where possible, could help to address this inequality and allow women and men to share the leave period, thus making it easier for both parents to maintain their careers, earning capacity and pension contributions.

Simon Moffatt is senior reward consultant at Prudential.