Solving the gender pensions gap shouldn’t be left to individual savers, but until there’s a drastic reform, there is action we can take. And we start by understanding the issue.
As we talk about the gender pensions gap, it’s easy to fall into the same trap that exists for the gender pay gap. Employers can say that they pay their workers the same wage for doing the same work, and that structural issues are to blame. There’s a kernel of truth to this – after all:
- Men earn 15.4% more than women per hour
- The female employment rate was 72.3% in December 2022 – however, only 27% of women work mostly full-time throughout their careers, compared to 45% of men
- Over one in five women spend 16 years or more away from the workforce
- One in ten women have quit their job because of menopause symptoms, with a lack of support only exacerbating the issue
These imbalances in the workplace mean there are differences in retirement outcomes for men and women. On average, women’s pension savings are only 33.5% the size of men’s. On top of this, women live on average 3.7 years longer than men, so they have to make a smaller sum of savings last longer.
This is the point where you congratulate me for mansplaining to women that being paid less, and having less time, to build up more savings is a bad thing. I await my “Ally of the Year” award at the privilege Olympics.
But here’s the thing. People are responsible for the structural issues that are routinely blamed for the gender pensions gap, which means that people alone can solve them. Making this a gender-specific issue rather than a story of failure on the part of employers is misguided. This is so much more than a quirky diversity, equity and inclusion topic. Employees missing out in retirement is something that comes at great cost to companies, our wider economy, and people’s quality of life.
What employers can do
Acknowledging the gender pension gap by actually putting it on your company’s agenda has a dual purpose. It shows support for all your people and demonstrates to them the importance of resolving the issue. Once it’s on the agenda, here are some suggestions actions you can take.
- Review your policies
Closing the gender pensions gap is harder in organisations with discrepancy in pay or poor parental leave policies. The bare minimum employers should do is to regularly review their gender pay gap, and develop generous benefits packages. Within pension schemes, employers could even look into favourable contribution rates for members taking time out of work or reducing their working hours. Improving pension and benefit offerings helps to attract and retain talent for the company, as well as securing brighter futures for pension scheme members.
- Communicate well
I don’t buy the argument that the gap is caused by a lack of knowledge. People don’t generally make decisions about their work-life balance or childcare commitments on a whim; most know they’re making a financial sacrifice. If people opt out of a pension scheme, the assumption that “they’re being irrational” or “they must not know the facts” ignores the reality of someone in financial survival mode who feels it’s rational to make decisions that improve life in the present – even if it’s at the expense of the future. That said, it’s still vitally important that the impact of working patterns, parental leave and career breaks on people’s pensions is communicated to employees. At a time where other priorities take centre stage, the ability to ask, “Have you thought about your pension?” in a way that’s relevant to someone’s circumstances can make all the difference.
It’s never easy to encourage employees to engage with their pension. If you feel you need help, talk to us.
- Provide the tools people need
Even if something’s communicated well, providing the tools that people need to actually set and track their goals is essential. For instance, at Gallagher we’ve developed a Pension Gap Planner, which offers articles, case studies and testimonials covering situations or life changes that could result in employees facing a gap in their retirement savings. There’s also a Working Pattern Calculator to help employees build a picture of the effect that changing their working pattern could have on their retirement.
Can we fix the gap?
It’s important that employers can make material changes to narrow the gender pensions gap, yet focusing on a gender binary detracts from a wider discussion. Namely, that our national policies, pension schemes, and wider society are constructed in a way that rewards paid labour (i.e. not taking career breaks, parental leave or reducing working hours) to the detriment of our health, wellbeing and caring responsibilities.
On top of this, there are a number of societal challenges affecting people’s retirement outcomes, including ageing populations, the underfunding of social care, rising inequality and poverty, and climate change. Nevertheless, in the face of these challenges, our pension system increasingly focuses on individuals as masters of their own destiny:
- Want to help the environment? Choose an ethical fund.
- Can’t afford a house? Put money into an ISA as well as your pension.
- Not enough money? You need to save more.
- Taking a career break? Make up the difference.
The sad truth is that these answers won’t solve the root causes of the gender pensions gap. There will still be a crisis in care, government policy will still favour men, and households will still be forced to make sacrifices in the face of extortionate childcare. Your organisation could have a perfect response to the gender pensions gap, but it’s unlikely to help those who are under immense financial pressures – the kind that can’t be solved by better money management or education.
What we can do
It may not be possible to close the gender pensions gap completely without changing the way that pensions work. However, we can still make a positive difference. Raising awareness of the issue goes a long way to helping organisations understand their responsibility towards their people and, ultimately, the wider workforce. Putting the right strategies and policies in place allows a company to take a stronger stance on the issue, and perhaps inspire others to do the same.
While you may not be able to bridge the gap financially from the outset, there are ways to progressively support employees. Offering the right tools, education and support mechanisms, and encouraging open conversations, can benefit employees’ financial wellbeing. Effective communication can help them understand the impact of taking a career break or evaluate their current pay, as benchmarked within their industry or market. This allows them to make more of their current financial situation and pensions savings – therefore reducing exposure to the retirement savings gap that many face.
The actions you can take now will help people navigate their working lives without jeopardising their prospects at retirement. Whatever you decide to implement, always start with your employees. Get to know them and support them to make the right decisions for their circumstances, whatever their priorities are.
For expert guidance on communicating complex messages about workplace pension contributions, contact us today.