Deborah Frost, CEO of Personal Group, discusses the challenges of the Pensions Gap and how employers can address it proactively
Great strides have been made in the past century to bridge the gender paygap between men and women, which currently stands at around 17% according to recent ONS figures.But there is more work to be done. At the current rate of decline it will take 60 years to eradicate this inequality, according to equality campaigners at the Fawcett Society.
Whilst the pay gap measures 17%, there is an even bigger issue to address as women approach retirement age – the gender pension gap. At almost 40%, this dwarfs the figure of the pay gap. More worryingly, there are 1.2 million women in their 50s now with no private pension savings at all. In real world terms, this means that more women are facing poorer lives in retirement than men and further widening gender financial inequality.
The reasons for the pension gap
Part-time working patterns (and therefore lower pension contributions), salary differences, and the rise in pension age to equalise with men have driven the gender pension gap. Individual circumstances that can also significantly affect finances, such as divorce and career breaks, have given rise to women experiencing a much more financially uncertain future.With inequality taking its toll on half of our population, the pension gap needs to find its place firmly on the HR agenda.
Steps employers can take to bridge the gender pension gap
While issues like equal pay are issues that the government must tackle, there are other tactics that employers can onboard to help bridge the gender pension gap. Much of the problem is around getting more people – and particularly women – involved and engaged in pensions.
The tactics and measures employers can put in place can be simple, effective and easy on HR budgets – starting with adapting employee communications. For instance,running workshops or one to one sessions with a Pensions Advisor to discuss the options available, such as the different types of workplace pensions. In turn, this will educate all employees on the difference a pension would make to their lives when approaching retirement.
Auto-enrolment is already helping to narrow the pensions gap and should continue to do so. Recent figures from the Department for Work and Pensions (DWP) show that take-up of workplace pension saving in the private sector has increased from 40 per cent of eligible women in 2012 to 73 per cent in 2017.
Outside of effective communications and engagement, there are also other options which could really put an organisation in a trailblazing position among its peers. Such as offering an enhanced pension pay style scheme for those on maternity leave, so that a lower income does not ever come back to affect them at a later time in their life when people often need the most support.
Giving employees the right tools
Employees need to be given the right tools to handle their finances and be encouraged to consider different investment strategies. Technology also has a key role to play in increasing contributions and engagement in pensions. If employees have access to an employee dashboard or portal in the form of an app, they will have all the information they need already collated in one place. Including information about the existing pension scheme offered by their employer. This portal can often be accessed 24/7, saving employees time and ultimately reducing employee costs of booking in a Pensions Advisor to host a workshop, when questions on pensions could be managed internally.
It is vital for employers to be better at communicating the unintended consequences of opting out of a pension. Citizen Advice states that some pension schemes don’t let you join later, once you’ve said you don’t want to join and encourage employees to check the rules before they decide to opt in or out.
When employees check their pension online in either government or employee portals,nudge marketing can be used to remind those that have opted out that they are losing out on pension contributions from their employers.
The holistic future
Whilst the gaping 40% gender pensions gap is unlikely to be narrowed for those coming up to pensionable age. So, let’s get it right for the next generation. Women who are within the current gender pension gap will not be able to claim back the money they have lost out on. Both the government and employers can do more. After all, we then turn to the tax payers who have to cover for this lack of financial planning. The cost to society is more than just to women.Employers can start by reviewing their employee benefits systems through a ‘gender lens’, ensuring that options meet the needs of all to have the biggest impact.