Women are more likely to save for a pension now than before auto-enrolment – but they earn less, provide more unpaid childcare and live longer. Is it time to drop the idea that pensions equality is reached through equal input, and start to address the structural factors that affect women’s outcomes instead? 

 

The average woman saves roughly £100,000 less than her male counterpart, while needing an extra £85,000 due to longevity and care needs, Scottish Widows has estimated, because of a higher prevalence of part-time work, career breaks and lower savings rates – which are in turn likely due to lower earnings, as women on average earn 35% less than men during their careers; the Institute for Fiscal Studies put the difference at 40% for 2019. 

 

Older women in particular were unable to save much or accumulate state pension credits for time spent caring for children, while seeing their state pension age increased in the name of equality. Women aged between 65 and 74 years have only saved half as much money for retirement as men the same age, having accumulated around £130,000 on average, whereas men in that age group will retire with a pot of about £260,000, the Scottish Widows has found. 

 

The finding highlights the differences between the situations of older and younger women and some of the progress achieved, but also puts into focus the problem of seeking to attain equality by putting men and women through the same system if that system is based on a traditional male life pattern – continuous full-time employment. 

 

“Despite the progress that’s been made in recent years by getting more women to save adequately for their retirement, there’s still a mountain to climb to reach true pensions parity," said Jackie Leiper, managing director of workplace savings at Scottish Widows.  

 

Leiper added that “there isn’t a quick fix” but said policymakers could make some simple changes like reducing the auto-enrolment threshold or improving the availability of information for key life moments that can significantly impact pensions.  

 

“As an example, making pension sharing the default during divorce, or requiring both partners to jointly sign single life annuity policies to ensure financial security upon the death of a partner, would go a long way to achieving equality in retirement,” she said, highlighting the lack of safeguards available for those who are financially dependent in a relationship. 

  

However, these policy changes do little to address the underlying reasons why women end up with less. “We need to fix the systemic inequalities too,” she said, such as improving the affordability of childcare to enable more women to take up and retain paid work. "This provides them access to workplace pension schemes, making them less dependent on their partners in retirement." 

 

The provider has been calling for changes to improve women’s situation in retirement, such as better maternity pensions, equalising shared parental leave rights, addressing the cost of childcare, and making it compulsory for pensions to be included in divorce proceedings. 

 

 

Different labour market experiences – including the pay gap and the length of the working life – were also identified as a key driver of the gender pensions gap by the Institute for Fiscal Studies. Savings rates will be affected by the employer contribution women receive, as well as their own contribution, while investment strategies could be another factor in defined contribution pensions. 

 

Policies that address the pensions gap for older women would be those around state pension income and other benefits, said Laurence O’Brien, a research economist at the IFS, such as generous indexation through the triple lock. The IFS also estimates that the introduction of the new state pension in 2016 means on average, women receive around £5.20 more per week than before, while pension credits can be accumulated toward the state pension for time spent caring for others. 

 

However, labour market differences are “probably the biggest thing”, he said, as women earn less than men on average. “Anything you can do to reduce the pay gap will have quite a big impact on retirement income in future,” he said, as would policy interventions aimed at changing women’s occupation rate. "That would be one of the main ways of addressing the pensions gap. Maybe something to do with motherhood [and] parenting more equally.” 

 

This is borne out by the fact that within each sector, the average saving rates of male and female employees were similar until around the age 35 but then begin to diverge, with average contributions continuing to increase with age for men but not for women. 

 

As much of the issue for women hangs on the fact that pensions accumulate with paid work, would a universal pensions income be a solution? O’Brien does not think that the government is likely to make the state pension more generous to shift the onus from private saving to the state. 

 

 

The government is, on the whole, not showing much interest in addressing the pension situation of women – perhaps this could draw renewed attention to its handling of the increase in women’s state pension age. Although it won a High Court case, the Parliamentary and Health Service Ombudsman, which has no sentencing powers, said that the Department for Work and Pensions was guilty of maladministration by not communicating the changes adequately. 

 

Last month, when challenged on the gender pensions gap, pensions minister Guy Opperman said that “successive governments have concluded that the way ahead on that is auto-enrolment". 

 

   
A DWP spokesperson reiterated this view: “Automatic enrolment has helped millions more women save into a pension, with participation among eligible women in the private sector rising from 40% in 2012 to 86% in 2020 – equal to that of men. Our plans to remove the Lower Earnings Limit for contributions and to reduce the eligible age of being automatically enrolled to 18 in the mid-2020s will enable even more women to save more and start saving earlier." 

 

The government has previously said it aims to implement auto-enrolment reforms in the “mid-2020s”, but no concrete plans have been published. A recent private member’s bill seeking to legislate for the reforms did not get a second reading, with the pensions minister citing time constraints. 

 

 

While the government is stalling, what can the pensions industry do to narrow the pensions gap? It is certainly lobbying; the largest pension providers, together with thinktank Onward, wrote to the chancellor last week to urge a swift introduction of the promised auto-enrolment reforms. 

 

Master trust Now Pensions, which previously sponsored research on ‘underpensioned’ groups by the Pensions Policy Institute, has signed up to the 50:50 The Equality Project set up by the BBC, whereby organisations commit to fairly represent the world. It is also among the pension firms putting pressure on the government to bring in the promised auto-enrolment reforms. 

 

“We should all be able to look forward to our later years with confidence that we have the same ability to draw a pension as everyone else. However, through no fault of their own, there are millions of women in the UK are who are currently ineligible for auto-enrolment,” said Joanne Segars, chair of trustees at the master trust. 

 

“We need to ensure that everyone has the same opportunity to save for later life and so we are calling on the government to make the policy changes that were made by the 2017 Automatic Enrolment review as soon as possible so that we can help to reduce pension inequality,” Segars added. 

 

Now Pensions is also calling for the £10,000 auto-enrolment earnings trigger to be scrapped – something that is not currently planned in the reforms the government has committed to – saying that it affects those working multiple jobs, who are more likely to be women, but the government is unlikely to do so. Last month, it said that if the earnings trigger is set “too low... the predominant impact will be upon people for whom it could make little economic sense to save into a pension and thereby divert income away from their day to day needs”. However, by freezing the level of the trigger at £10,000 in its 2022-23 review, it has agreed to a real terms reduction. 

 

 

An industry that itself lacks diversity - more than 80% of scheme trustees are male, and a quarter of schemes have all-male boards - will struggle to address the problems of those it does not represent, but it is currently working with the Pensions Regulator to improve. 

 

More than 60 volunteers from across the industry have formed four workstreams, one of which includes developing the best practice in making trustee boards more diverse. TPR plans to share data, research and approaches with other regulators over the coming months but did not comment on its stance regarding quotas. It said an action plan will be published “in the coming months”. 

 

The regulator said it has pledged to work with government and the pensions industry to look at ways of reducing inequalities in saving – including ensuring decisions made on savers’ behalf stand up to scrutiny. “Improving diversity and inclusion across the pensions industry is fundamental to these goals,”said executive director of regulatory policy, analysis and advice David Fairs, adding that diversity on trustee boards leads to better decision making. 

   

“Limited participation on trustee or executive boards in relation to protected characteristic, including gender, age, race, sexual orientation, religion or belief or disability can be a barrier to success. We want to see all schemes truly embrace the value of diversity and take strident steps to bring about change within their individual organisations,” Fairs added.