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The Pension Geeks have turned Pension Awareness Day into a week of online webinars and are dedicating much of this year’s campaign to raising awareness among women and men about the gender pensions gap.
The gender pensions gap is still shockingly high. Master trust Now Pensions found in March that men have, on average, more than twice the private pension income of women, at £8,620 a year compared with just £3,920, creating a gap of £4,700, despite a record number of women being in employment (72.4%).
The concern around the pensions gap is heightened because the national lockdown and furloughing have led to a resurgence of traditional family arrangements with women as unpaid caregivers, compounded by the fact that Covid-19 job losses have so far hit women harder than men.
Why the wait for AE reforms?
The pensions gap is “a huge, huge problem and we really need to tackle it. If we just leave things as they are, then by 2060 we’ll only have closed the gap by 3%,” said Joanne Segars, trustee chair of Now Pensions. “That’s not good enough, we really need to come together and do something about it.”
She pointed to structural problems in the pension system, which she said is not built around women’s and generally around modern working lives. “We need to tackle some of those structural issues if we really want to get to the heart of this,” she said.
Segars wants to see reforms to auto-enrolment implemented, to ensure more women, who are overrepresented in low-paid and part-time jobs, are captured by the policy. This would mean removing the requirement to earn £10,000 from a single job and mandating that contributions are made on the first pound earned – rather than from £6,500 upwards as is currently the case.
“If we remove that £10,000 threshold, that could bring 2m people into pensions, it would be a huge step forward especially for women,” she said.
The government finished the phasing in of auto-enrolment in 2017 for existing employers and 2018 for new employers. It has since stalled on reforms, despite clear industry recommendations from a review it commissioned and a previously benign economic environment.
“The answer we get back [from the government] is, ‘These things are kind of quite expensive’, ‘Now is not the right time’,” said Segars, criticising that it never seems to be the right time for the government. “Now has to be the right time,” she added, saying that much more would have been done if men’s pensions were worse than women’s.
The feeling was shared by Kate Smith, head of public affairs at provider Aegon. “They can’t keep kicking this into the long grass. It’s so important that women are financially empowered,” she said. She worried that while auto-enrolment reforms had already only been promised for the ‘mid-2020s’, with Covid-19 “it might be the 2030s” until anything happens.
Predicted divorce boom will exacerbate the problem
It is not just women who are left out by the pension system that will retire with less. A recent survey by Aegon has found that a greater percentage of women (15%) than men (10%) is likely to decrease contributions in the next six months as Covid-19 affects their lives, and in time their pensions.
The effects could be direct and indirect; not only are women opting for furlough to look after children during school closures and are more likely to lose their jobs, Citizens Advice is also expecting a wave of divorces following lockdown.
While pensions are the second-biggest asset most couples have, they are still often not shared or even discussed in divorce proceedings. For 2017, Scottish Widows found that women lose out on £5bn each year because of this and called for the inclusion of pensions in divorce proceedings to be compulsory. The pensions gap is bigger than average for divorced women, who have just a quarter of divorced men’s pension wealth, while single mothers have the smallest pots of any group.
How can industry push the gender gap problem up the government’s agenda?