New research highlights the pressing need for action to address the growing gender pension gap in society. A report by consultants LCP (Lane Clark & Peacock) warns of a “real risk” of a new generation of pension inequality if significant steps are not taken. In this article, we will explore the key findings of the report and discuss the crucial actions required from the government, employers, and the pensions industry to bridge this alarming gap.
The Government’s Responsibility:
- Reducing Inequalities: The government must take further steps to reduce the inequalities that emerge following the birth of a child. Effective policies on shared parenting and increased support for childcare for the youngest children are essential.
- Supporting New Parents: Policymakers should review and enhance the support provided to new parents, focusing on addressing the underlying causes of pay gaps.
- Equipping Individuals: Pension schemes and providers must empower both women and men to better understand their pensions and make informed choices.
Employers’ Role:
- Tackling Pay Gaps: Employers should proactively address the various causes behind pay gaps in their organizations to promote gender equality.
- Supporting Caregivers: Companies should support workers with caregiving responsibilities, particularly in later life. This support should prioritize flexible working arrangements to enable employees to care intensively without sacrificing future employment opportunities.
Persistent Impact:
The report emphasizes that pension outcomes are often determined by labor market experiences spanning several decades. Despite recent progress in gender pay equality, historic inequalities in the workforce are likely to persistently impact pension outcomes for years to come.
Government Acknowledgement:
Pensions Minister Laura Trott acknowledges the complexity of the gender pension gap, emphasizing that it is not a problem with a simple solution. Government initiatives to support childcare have been seen as a step in the right direction to address pay gaps that contribute to the pension divide.
Statistics Highlight Disparity:
Data from the Department for Work and Pensions (DWP) reveals a significant gap in private pension wealth between genders. On average, a woman aged 55 to 59 had £94,000 in pension savings, while an equivalent man had £145,000. The introduction of the new state pension system in 2016 aimed to simplify pensions but hasn’t fully closed the gap.
Automatic Enrolment Success:
The UK’s automatic enrolment program has played a crucial role in expanding pension coverage. It has brought millions of women into pension saving for the first time, significantly improving retirement prospects for many.
The Urgency of Closing the Gap:
Experts stress that closing the gender pension gap requires concerted efforts from the government, employers, and the pensions industry. It is not solely a pensions problem; it is deeply rooted in labor market inequalities and barriers to auto-enrolment.
High Cost of Childcare:
The high cost of childcare has a direct impact on women’s ability to accumulate pension savings. Many women reduce their working hours to manage childcare responsibilities, ultimately affecting their pension pots.
Industry Response:
The Association of British Insurers (ABI) emphasizes the need for urgent action to address the gender pension gap. They highlight the multifaceted causes of the gap and the importance of improving individuals’ understanding and engagement with their pensions.
Conclusion: The gender pension gap is a pressing issue that requires immediate attention. To ensure a more equitable retirement future, government, employers, and the pensions industry must collaborate and take decisive actions to bridge this gap. Closing the gender pension gap is not just a matter of pensions; it is a crucial step toward achieving broader gender equality in society.