INNER WORKINGS MIND THE GAP IN WOMEN’S PENSIONS by Tom Murray Head of Product Strategy LifePlus Solutions, Majesco The perennial issue of the gender pay gap gets a lot of publicity but the same level of publicity is not given to an issue that is, at least in part, derived from it. A recent report by Profile Pensions showed that there was an even wider gender gap when it comes to UK pensions. Men’s pension pots are significantly higher than women’s – almost 50% bigger in some parts of the UK and averaging 40% across the country. Given women’s greater longevity, this is surely storing up big problems for the future. The gender pay gap itself is one of the creators of this problem. As men earn more than women, they can save more. This also means that matching funds from employers are higher, as are the governments contributions. Over time, these contributions compound to make men’s pension pots significantly bigger than women’s. While this problem that would dissipate as the pay gap narrows, it doesn’t solve the whole issue. The pension gap situation is much worse as it is almost double the actual pay gap. There are other reasons for this disparity in pension saving that need to be addressed. One of the most significant is that women are far more likely to have to reduce their working hours or cease working temporarily in order to provide both child-care and
elder-care during their working life. The resulting effect on their pay is also reflected in the effect on their pension savings. And for those who move to part-time work due to caring obligations, many fall under the £10,000 threshold for auto enrolment and therefore are no longer in any scheme. This means that they also forgo the matching employer and government contributions. When they resume, there is also a likelihood that, having been put out of the scheme for a while, they will have lost the long-term savings habit and will opt-out of being re-entered into the scheme. When auto enrolment was originally introduced, this threshold was put in place as it was felt that the contribution would lead to too big a reduction for those on lower wages and that the cost of administration would be too great for the amount saved. It was pointed out to the government that there were a significant number of people in the UK with multiple jobs and that they might not qualify for auto enrolment under any for them even though their cumulative earnings would comfortably exceed the threshold. The truth was acknowledged by government but it was felt to be too difficult an issue to tackle at the time.
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