- Women need to be aware of the impact of career breaks and part-time working on their pensions, and how they may be able to mitigate the impact.
- Online ‘Mind the gap’ calculators, using video, animation and social media can help to promote relevant messages.
- Providing education on how pensions work and what steps women can take to make sure they don’t fall behind with their savings during career breaks will help boost the financial wellbeing of female staff.
The gender pensions gap, representing the difference in retirement income between men and women, was recently found by trade union Prospect to have stood at almost 38% in 2019-20; more than double the size of the frequently cited gender pay gap. Here are some practical tips for employers on how they can reduce the gender pensions gap.
Find the root causes of the gap
As well more women than men taking time off work to raise a family, the pensions gap is also caused by women being more likely to work part-time in lower paid jobs, where they are often ineligible to be automatically enrolled into a workplace pension scheme.
Pete Hykin, co-founder at pension provider Penfold, explains that the pensions gender gap is also a direct consequence of the gender pay gap many women continue to face in the workplace. “Unfortunately, the pensions industry has done little to rectify this issue and has fallen short when adapting to changes in the way people work, disproportionately affecting women who are more likely to have career breaks or to work part-time," he says. "Even great initiatives like auto-enrolment are set up to perpetuate this inequality."
Awareness is part of the issue says Karen Bolan, business development consultant for risk management consultancy Gallagher’s retirement communication practice. “Women are not always aware of the impact of career breaks and part-time working on their pensions," she says. "If they were, then they would stand a chance of being able to mitigate the impact."
Men should also know more about the issue, adds Bolan. "A shared awareness and understanding could lead to a shared responsibility between couples to mitigate the impact, particularly of maternity leave and the way women return to the workplace.”
Address contribution levels
Employers may want to consider the ways in which they can help their employee improve their retirement savings through adjustments to contribution levels.
Karen Partridge, principal consultant at Gallagher, states that for some women working more than one job, the application of multiple auto-enrolment limits mean they stay outside the system that is set up to protect them. “We also need to address the issue of lost savings while on maternity leave, or taking time out and reducing hours for caring responsibilities," she says. "We need to engage the government and employers alike with these issues and preferably contribute to a [solution]. This could include higher employer contributions on return from maternity leave, or perhaps a tax break or two from the government,” she says.
Perhaps decisive policy action is needed to address the pension gender divide. Andrew Tully, technical director at pensions provider Canada Life, suggests that relatively simple changes to the way auto-enrolment works would benefit both men and women and would go a long way towards levelling the playing field. “Changes such as removing the lower contributions limit would let more people benefit from every pound earned, while removing the £10,000 [minimum earnings] threshold would make auto-enrolment more inclusive and begin to level up pensions for all,” he states.
Introduce flexible policies
More flexibility and support is needed for women, and anyone whose career goes through lower income periods, to help them save for the future.
“Pension providers need to offer women accessible pensions with flexible contribution systems so they can adjust their payments and choose how much they’re saving at any time,” says Hykin.
Meanwhile, Romi Savova, PensionBee’s chief executive, says that if men and women were to work the same hours at equal pay, with both working fewer hours to share childcare responsibilities during a child’s early years before returning to full-time work, the gender pension gap could be eliminated. “This change would increase women’s participation in paid employment over the long-term, boosting their pension pots by more than £106,000,” she says.
Address gender pay differences
More often than not, where a pay gap exists for women, a pension gap will follow.
Savova explains that the PensionBee team is passionate about campaigning for wage equality. “With the gap not expected to close until 2050, this is something that all employers need to advocate for," she says.
"We report on our gender pay gap as we believe it’s important for [employers] to start tracking these metrics as early as possible and, if necessary, make changes to close the gender pension gap once and for all.”
Use engaging messages
Many women, with competing demands on their time, may be tricky to engage with the subject of pensions.
Partridge recommends being creative in how to land the message. “Online ‘Mind the gap’ calculators, using video, animation and social media, can help to promote relevant messages," she says. "We need to talk to women where they are likely to engage, and encourage pensions platforms to make it easy for them to make changes to how much they save.”
There can sometimes be a lack of transparency around what parental support is offered by employers, making it a difficult area for employees to navigate.
Savova suggests offering clear, supportive and gender-inclusive paid parental leave packages, so employers can help their staff share responsibilities from the very beginning of their roles as parents.
Make use of providers' tools and support
Employers have a key role to play in reducing the gender pension gap and can make use of the financial wellbeing support programmes and tools often offered through pension providers. “Providing education on how pensions work and what steps women can take to make sure they don’t fall behind with their savings during career breaks will help boost the financial wellbeing of their female staff,” Hykin says. “Employers should also choose pension providers that can offer tools such as dashboards and calculators, so people can see how much they have saved and what they need to do to reach their goals.”
Employers can provide valuable information to staff on the benefits of saving for retirement, particularly when paying into a pension fund in their twenties and thirties.
Alexandra Mizzi, legal director at law firm Howard Kennedy’s employment team, points out that many employees do not realise how crucial early contributions can be in building up an adequate fund. “Likewise, employees may not always appreciate the impact of career breaks on their national insurance contribution records and how this will affect their entitlement to a state pension,” she says. “Employers can arrange presentations by financial advisers and highlight the potential advantages of salary sacrifice arrangements for pensions purposes, as they are required to continue to pay the sacrificed element even when the employee is only receiving statutory maternity pay.”
