Sunday, 24 September 2017

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    Closing the pensions gap

    The gender pensions gap is even wider than the gender pay gap, and the industry can’t ignore this, writes Carolyn Saunders

    In a month when the Pensions and Lifetime Savings Association has launched its much-needed ’Breaking the Mirror Image’ campaign, focused on improving diversity in the workplace pensions sector, it is sobering to think about the extent of the gender pensions gap.

    mind the gap index

     

    DC pension wealth for women of £5,500 which is less than half the £12,000 for men

    The most recent Wealth and Assets Survey from the Office for National Statistics, which covers periods up to June 2014, shows a median DB pension wealth for women of £52,500 as compared with £87,700 for men and a median DC pension wealth for women of £5,500 which is less than half the £12,000 for men. And these statistics are consistent with the findings of the Zurich Workplace Savings Barometer that there is a potential gap of almost £50,000 between employer pension contributions for men and women over a working lifetime.

    The pensions gap is larger then the gender pay gap and so there are clearly other reasons

    In part, this disparity is a function of the pay gap, which is currently 18.1% overall according to figures released by the ONS in October 2016. However, the pensions gap is larger then the gender pay gap and so there are clearly other reasons that are contributing to this inequality. These include that women are more likely than men to have caring responsibilities and to take breaks from work as a result; that women are more likely to work part time (which tends to be paid at lower hourly rates then full-time work); and that women tend to be less confident about decision-making in relation to pensions. Also, of course, the auto-enrolment earnings threshold excludes 32% of employed women as compared with 14% of employed men.

    As an industry, we have a limited ability to influence the pay gap, which remains the main cause for the gender pensions gap. However we can influence the way in which we help women, in particular, to understand retirement saving so that they can improve their knowledge of pensions and develop greater confidence.

    Women are still saving less for retirement than men, even when they earn the same as men

    And this is key. Data from Scottish Widows has found that women are still saving less for retirement than men, even when they earn the same as men. Women are also more likely to say that they do not understand pensions products and there is evidence that many women, including graduates and professionals, defer to their male partners in relation to decisions about pensions, because they think of men as being ‘’better’’ at making these types of decisions. This is supported by research from the Organisation for Economic Co-operation and Development, which has found comparatively low levels of financial awareness amongst women in the UK as compared with some other countries. For example, only 24% of women in the UK answered questions about interest rates correctly, compared with 85% of women in New Zealand and 83% in the Netherlands.

    Many of those who provide pensions products are already doing good work around this issue, including developing strategies to engage with women at particular life trigger points, such as when they have children. But there is more work to be done, especially around financial education for women.

    Improving diversity in the pensions industry in general through initiatives such as the Women in Finance Charter (which is a commitment to gender diversity in the financial services industry) and on trustee boards, in particular, should ensure, over the longer term, that women’s perspectives are better understood. Meanwhile, employers, trustees and providers should consider how they may be able to improve engagement with women by taking account of their differing needs and capabilities.

    Carolyn Saunders is a head of pensions and long-term savings at Pinsent Masons

     

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