To mark Pension Awareness Week (11th – 15th September), Vidett, the UK’s largest professional trustee and pension governance firm, is highlighting how employers can help close the gender pension gap and ensure their female employees have a secure retirement.
This week is Pension Awareness Week, a campaign that encourages everyone to get to know their pensions better and has helped improve the financial lives of millions of people over the last decade.
Caroline Eastwood, Client Director at Vidett, says: “A gender pay gap is a complex issue to solve and it’s likely there will always be a gender pensions gap. However, there are actions companies can take to drive change. The most important thing is providing financial education and information for women from early on in their careers.
“Employers also need to be alert to the reality of the impact of gender pension gaps for some women. A Scottish Widows ‘Women and Retirement Report’ highlighted 72% of single mothers are concerned about running out of money in retirement, compared with 61% of all women. Ethnic minorities are also more likely to be concerned – 68% of Black women feel worried and 54% have a small amount of retirement savings or nothing at all, so it is essential companies take action to support women in their employment.”
Caroline highlights sometimes the gender pay gap is not a bad sign for a business as it could accurately reflect the demographics of the workforce and that women have the choice of working part time hours to support their family requirements instead of being out of employment.
She also points out gaps have been caused by cultural norms, including women being more likely to take time out for caring duties, such as maternity leave, working part time while their children are young or caring for elderly parents, but these norms are changing.
Lowering the threshold
One issue for women working part time is it can result in lower pay which may not even trigger the automatic enrolment requirement to join a workplace pension. One solution would be for government to scrap the automatic enrolment minimum earnings threshold altogether as this could bring 1.8 million women’s jobs into the pension system. Lowering the minimum age for automatic enrolment may also help younger women.
Historically, employers had age and seniority requirements for joining their pension scheme which automatically excluded women who did not stay with an employer for more than five years and/or reach management level. Thankfully, changing HR practices and auto-enrolment have helped overcome this issue.
The impact of divorce
Divorce also can have big impact on a woman’s retirement savings. One partner often builds up more pension savings than the other and these pots can be the biggest asset after the family home. An extreme example could be a woman who has chosen to care for their children and not work. She is relying on her partner’s pension, but divorce can leave her with no pension provision.
There is no silver bullet to unlocking the problem – but here are some things employers can do to support their female workers:
- Raise awareness with younger women – from nurturing daughters about future careers and talking about roles in a gender-neutral fashion to supporting and engaging younger female employees in saving money so they can get a head start in their twenties.
- Speak to employees – explain how much they are paying into their pensions from their salary, how much their employer is paying in and how much the government is contributing through tax relief. For most people, saving into a workplace pension should mean they can expect somewhere between a minimum and moderate standard of living.
- Talk about pensions– when deciding which parent should take on caring responsibilities, consider important pensions issues such as long-term earning potential, workplace specific pension benefits and even the benefits of joint annuities. They can have a big impact on retirement plans. Talking about pensions with your family and friends helps everyone build an understanding.
- Educate employees on what they can do to improve their retirement– look at your pension communication strategy. For example, Scottish Widows has lots of useful information on its Future Planning Hub and other big companies have a bounty of material that can help support employee education – or work with your provider or pension communications consultant.
- Explain how much women will need for a decent retirement– according to the Pensions and Lifetime Savings Association Retirement Living Standards, the minimum a single person needs in retirement is £12,800 a year, so the State Pension gets people almost there. However, £23,300 a year is needed for a moderate lifestyle and £37,300 a year for a comfortable one.
- Track down past pensions– with house moves and busy family lives, it is easy to lose track of pension pots. Employees can find a lost pension using the Government’s Pension Tracing Service.
Employers can support female employees in many ways to help ensure they have a plan for retirement but, first, start educating women by pointing them to the live sessions that Pension Awareness are running this week to learn about the pension and investment basics so they can focus on their finances for the future.