Tackle gender pensions gap as part of labour market policies – IFS

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The Institute for Fiscal Studies and the Nuffield Foundation are calling on policymakers to start treating the gender pensions gap as a labour market issue. In a new report, they show private pensions are now the main source of the gender gap in pensions income, as for the first time, state pension incomes are similar for women and men reaching state pension age.
   
On International Women’s Day, the IFS shows that among those born in the early 1950s, women's private pension incomes are a shocking 45% lower than men’s. Its research, ‘The gender gap in pension saving’, is funded by the Nuffield Foundation as part of a series of reports on ‘Pension saving over the life cycle’.   
 

No change for younger women

   
Gender gaps in pension saving are almost entirely driven by differences in labour market patterns, which are closely linked to the birth of children.   
     
“These inequalities between men and women remain even for the youngest working-age individuals, implying there will be persistent gender differences in average private pension incomes for decades to come”, the institute predicts.   
     
To date, little has been done by a largely male parliament to either address childcare as a barrier to working or to recognise unpaid work as an economic contribution.   
 

SP design no longer key contributor to gap 

     
More positively, women’s and men’s average state pension income gap is now less than 5% for those born in the 1950s. In contrast, women born in the 1940s receive a state pension income 25% lower than men’s on average. Reforms like the introduction of the flat-rate state pension 2016, a lower number of qualifying years and national insurance credits for parents and carers mean the design of the state pension no longer substantially contributes to the gender pensions gap and female pensioner poverty.   
   
“Reforms have led to the gap between men’s and women’s state pension incomes shrinking to almost nothing for the recently retired. But gaps in private pension income remain. A lower amount is put into women’s pensions each month than men’s, on average, driven almost entirely by differences in employment rates, hours worked and hourly wages,” said Laurence O’Brien, an IFS research economist and one of the authors of the report.   
   

Tackle gender inequalities in the labour market to close gender pensions gap – Nuffield 

 
The differences have narrowed over time, but labour market gaps are still prevalent even among the youngest generations, especially after having children. 
   
“As these generations will not retire for many decades, we can expect a gender gap in pension incomes to remain for a long time yet. Policymakers concerned with this gap should see it as part and parcel of labour market issues, as opposed to a completely distinct issue with private pensions themselves,” he added.   
     
Alex Beer, welfare programme head at the Nuffield Foundation, said the UK pensions system with its reliance on private saving means differences in labour market participation and earnings lead to large and persistent inequalities in labour market outcomes between men and women, which subsequently show up in the gender gap in pension incomes.    
   
“Addressing the gender pensions gap therefore requires a multifaceted approach, with policies to tackle gender inequalities in the labour market at its core,” Beer said.   
 

Fathers can contribute more than twice what mothers can 

 
The IFS found that among all 22 to 59-year-olds, including those not in paid work, 59% of women were saving into a pension in 2019, compared with 66% of men.   
   
Average annual pension contributions were £2,600 among women and £3,400 among men, but these gaps in contributions widen significantly after women have children. Two years before the arrival of a first child, prospective fathers and mothers make similar contributions to their pension, but six years after the birth of the first child, average contributions made by fathers are more than twice the average contributions made by mothers.    
   
The earnings threshold in auto-enrolment also takes a toll on women’s pensions. The IFS found that “among private sector employees, the gap between men’s and women’s pension participation is driven entirely by the fact that a higher share of women earn less than £10,000 per year and so do not have to be automatically enrolled into workplace pension saving by their employer”.   
   
Provider Scottish Widows recently called on the government to abolish the requirement to earn £10,000 from a single job in order to be auto-enrolled. Its research found the threshold has a disproportionate impact on women from ethnic minorities as a fifth (21%) of Black women, 17% of South Asian women but just 4% of White women were not auto-enrolled by their employer because of the £10,000 threshold.     
   
    
Will the worker shortage force the government to address gender-related labour market issues? 

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