Clever ways to reduce the ‘gender pension gap’
Over the past three years, most companies in the UK have spent a significant amount of time and resource either enhancing or creating Gender Pay strategies to help change the employment landscape for women in the workplace.
The very positive work in this area has taken up large amounts of focus, but it is only the start of where we need to progress to, and the next gender gap issue for society to deal with is already engaging the minds of senior policy makers across Europe: the Gender Pension Gap.
According to a 2018 study conducted by the Chartered Institute of Insurance (CII), by the time a woman is aged 65 - 69, her average pension wealth is £35,700 - roughly a fifth of that of a man her age.
A summary of the Gender Pension Gap was included in a 2012 EU paper prepared for the European Institute of Gender Equality, in which it states that the Gap “in pensions can be understood as the sum of gender inequalities, including the pay, over a lifetime, including differences in the life course (motherhood penalty), segregated labour market and gendered social norms and stereotypes more generally.”*
From this we can see that part of the Pension Gap can be dealt with by reducing the Pay Gap as they are directly linked over an employee’s career. However, closing the Pay Gap on its own will not fully resolve the lifetime differential.
As with the Gender Pay Gap, the way in which we can address the Gender Pension Gap will require societal changes; however, there are several ways in which employers can start to assist women in the workforce in order to reduce the impact.
Communication is key
Most employers work with their Pension administrators to improve and enhance communications. In addition to the increasing focus on financial wellbeing and the associated employee education on these matters, there is a simple opportunity to inform employees.
A detailed overview of the pensions gap as it applies in the UK was prepared by Sheffield University and Scottish Widows in 2016, titled “Closing the Pension Gap: Understanding Women’s Attitudes to Pension Saving” and the study provided several recommendations for both government and industry. Some of these can be easily communicated to employees:
- Before a colleague goes on maternity leave, advice can be provided. If you are a stay-at-home mum, make sure that you are registered for child benefit, even if you are not claiming the payments because your partner earns more than £60,000. This is very important for your state pension record.
- If you’re in this situation, why not ask a higher-earning spouse to pay into a pension on your behalf? Even people who do not earn enough to pay income tax can pay £2,880 a year into a pension, which is boosted to £3,600 with tax relief. If you have a Government Gateway ID, you can do this online in seconds.
- If you work part-time and earn less than £10,000, ask to join your workplace pension. Although you won’t be automatically enrolled, those earning more than £6,032 are entitled to join and receive a contribution from their employer. If you earn less than this, you can still join and pay in, but you won’t get the employer top-up. Those resuming a career after their children reach school age should think about maximising pension contributions, which is particularly worthwhile if your employer offers to match contributions.
Providing a different level of support
As well as informing employees of the pension impact of certain decisions they may be faced with, there are also elements of support provision employers may be able to consider which can have a positive impact on both Gender Pay and Pension Gaps. These include:
- Providing subsidised and accessible childcare facilities, enabling colleagues to get back into the workforce.
- Reviewing your auto-enrolment strategy to understand if it has any unintended barriers to allowing women to access the pension plan, particularly whether adopting a ‘relief at source’ and/or ‘net pay’ provision may be a way forward. Currently under ‘net pay’, basic, higher and additional rate taxpayers receive all the tax relief they are entitled to automatically but non-income taxpayers, who have an annual allowance of £3,600 per annum, do not. Under relief at source all savers, irrespective of their tax status, receive basic rate relief, and higher and additional rate taxpayers must claim further tax relief back through self-assessment.
In addition, employers can look at some of the ways in which they can support employees to help them in creating a decent level of pension funding for their future. Understanding the savings decisions of younger women (those aged twenty-five to thirty-nine) with incomes that might suggest saving is affordable, and the factors that influence or inhibit saving behaviours, is critical to understanding how we can best address this significant savings gap.
Including this type of analysis as part of your gender pay review will help employers have a better overall picture of the way in which their policies and practices are impacting on their employees across the entire employment lifecycle.
If you need help with your Gender Pay Gap reporting, or advice on how you can address the Gender Pension Gap, we can help. To get started, email me at email@example.com or call us on 020 3457 0894.
*Gender gap in pensions in the EU Research - note to the Latvian Presidency