Retirement—what image does that conjure up? Reclining on a deck chair somewhere warm? Dedicating yourself to a much-loved hobby? Leisurely lunches and treats?
For many of us, these dreams won’t come true – and this disproportionately affects women.
Many women struggle to contribute to their pension. And of those who do, a large proportion pay in less than men.
According to Aviva, the gender pension gap was 37.9% in 2019/20. This is a significant amount, and means the next generation of women to retire will be considerably worse off than the men they work with today.
So why do we have a gender pension gap? And what can you do to help your women employees?
Falling behind
Automatic enrolment has done its job of getting people involved in workplace pensions. Great!
However some groups have fallen behind. This is particularly striking amongst women, but also affects people from minority ethnic backgrounds, people with disabilities, and service sector employees.
The gender pensions gap is estimated to be over twice the size of the gender pay gap. Women’s retirement wealth averages only one-third of men’s in the UK, and three million women are missing out on workplace pensions altogether because they don’t qualify for auto-enrolment, according to Now Pensions.
And why don’t they qualify? To become auto-enrolled in a workplace pension in 2022, you have to earn over £10,000. Many women just don’t meet that threshold.
But, why?
Times aren’t changing
Emma Douglas, Managing Director of Workplace Savings at Aviva, says, “on average, the gender pensions gap begins to widen from the age of 35.” This reflects the lifestyle differences between men and women, with this age being “a clear line in the sand where women are often making milestone career and childcare decisions, and opting to work part-time.” This also marks the age where elderly parents start needing more care, resulting in a ‘sandwich generation’ of workers looking after young children and elderly parents. And again, this burden falls disproportionately on women.
With women still bearing most of the responsibility of childcare and other caring duties, it’s no surprise that at this point many reconsider their career choices. They may choose to stop working, work part-time or reduced hours, or take on a job that pays less money to be closer to those who depend on them or have fewer responsibilities.
And according to the Pensions Policy Institute, “low wages, working part-time, or holding down two jobs that both pay less than £10,000, and being too old or young are the main reasons for workers being ineligible for auto-enrolment.”
What’s being done to fix the gender pension gap?
This is an issue that needs to be addressed – and fortunately, work has started in this area.
As I write, the pensions industry is pressuring the Government to follow through with the recommendations made in the 2017 pensions review. They’re lobbying to lower or abolish the qualifying threshold, which will naturally help those on lower incomes – who are mostly women.
There’s of course more that can be done. Pension providers could design a product that speaks to women: one that compensates for lower incomes, career breaks, divorce and the societal issues women in the workforce have to deal with.
Then there are the employers.
You can help your people to mind the gender pension gap
With Diversity, Equity and Inclusion becoming a priority, employers have an opportunity to make a real impact by supporting women to make positive pension decisions and start a conversation.
Yes, matched contributions are a wonderful thing and do encourage employee take up, but they tend to appeal most to those on higher incomes. And let’s face it, you probably have some employees who don’t understand what ‘matched contribution’ means. You need to fill in the gaps, and talk about options.
It’s time to crack open the EGG – Education, Guidance and Good communication.
Using EGG as a tool to help women navigate pensions
In the UK, we don’t often talk about financial subjects like pensions and retirement. As a nation, we’re rather uncomfortable talking about money. According to Klarna, the payments and shopping service, “a third of Brits feel too uncomfortable to talk about money with their friends and family.” So this can be a tricky situation to navigate – but we’ve put together some tips that could help you reach out to your employees.
Sheffield University studied women’s attitudes to pensions. Three results from the study’s participants stood out to us:
- A lack of understanding led to low confidence in decision making.
- Complaints around the inadequacy and inaccessibility of guidance and pension literature.
- They prioritised other financial responsibilities. An increase in costs from having children prevented them from starting or continuing contributions.
Here’s how EGG can help women to understand pensions and encourage more to contribute:
Education
Arrange educational sessions aimed at women, covering topics such as:
- The benefits of salary sacrifice whilst on maternity leave.
- The benefits of claiming child benefit.
- The impacts of early pension contributions and career breaks.
Your male employees can attend these sessions too! After all, many of them will have partners in this situation or may be facing the same predicament themselves if they’ve also had to scale back work hours to meet caring responsibilities. In general, the more awareness there is on the effect career breaks have on pensions, the better.
Guidance
Create tools to empower your people to make the decisions that are right for them. There are calculators that show the impact of different working arrangements and career gaps on future retirement funds. Ask your provider to help with the solution.
To provide more personal support to your people, train your managers. Give them the knowledge they need to communicate effectively with their teams. You shouldn’t expect them to answer all their team’s pension questions, but they should be able to signpost them to the answers.
Good communication
Your pensions communications need to recognise that women face additional barriers to getting pensions equal to their colleagues. The pensions gap won’t close if we are not transparent.
Support women with good communication. Talk to them about pensions and identify where the knowledge gaps are. Then plug those gaps with better explanations. Use these insights to steer your future pension communications plan.
Being a good communicator means putting yourself in someone else’s position and seeing the world through their eyes. This will help you know what messages you need to highlight. Perhaps it’s communicating that parents may consider sharing the caring responsibilities. Shared parental leave helps spread the long-term impact on pensions that career breaks can have. Or perhaps you need to consider targeting pension communications at ‘returners’. Give them information on how to put in more than the minimum amount to make up for any losses whilst they weren’t working.
Communicating pension schemes are tricky at the best of times, and even more so if you’re trying to encourage take up within a certain demographic. Let us help you crack the pension EGG. We can guide you towards a long-term communication strategy to make sure all your people benefit. Contact us for more information.
