On 4 April 2022, the government published a briefing paper detailing written evidence from the Trade Union, Prospect, to the Work and Pensions “Saving for later life” inquiry, which highlighted that the gender pension gap is “significantly larger than the gender pay gap, and applies to a large (and growing) proportion of the female population”. Whilst definitions of the concept vary, as the gender pension gap does not refer to a specific measurement, it is generally used to set out differences in retirement outcomes for men and women. Many definitions include a comparison of the retirement incomes of men and women and, despite varying estimates, it is clear from reports that the difference in these incomes is greater than the gender pay gap.
It has been reported that the gender pension gap is much larger for private pensions than state pensions, and commentators cite three main causes for this, and for the gap itself, being:
- Factors in the labour market: it is noted that women are more likely to spend time in part-time employment, or not in employment at all, to undertake primary care responsibilities. This has an impact on the gender pension gap due to the fact that people do not generally contribute to private pensions when in periods outside the labour market, and with the salary threshold for auto-enrolment currently £10,000, those in part-time employment may not meet the criteria to be automatically enrolled by their employers.
- Pension system designs: the design of auto-enrolment into a workplace pension in the UK widens the gap between lower and higher earners in retirement and puts those with more than one job at a disadvantage.
- Demographic differences: women tend to live longer than men, so are more in need of making their retirement savings last longer.
Proposals to reform auto-enrolment legislation by 2026 in order to extend the criteria and lower the earnings threshold, and the age at which workers are eligible for auto-enrolment, could help to decrease the gap as more employees will be eligible who would otherwise not have been [1]. Other proposed reforms to cut the gender pension gap include more provision of affordable childcare for pre-school age children. Employers could also provide part-time workers with more information about their options to contribute to a pension, even where the individual would not otherwise be eligible for auto-enrolment. Additionally, the awaited introduction of pension dashboards could help to make pensions more accessible for workers. With the reforms to auto-enrolment still to surface, it will be some time before we see any potential impact of these on reducing the gender pension gap. However, it is clear from the briefing paper that the government is shining a light on the disparities.
[1] See our earlier blog on the extension of the auto-enrolment criteria here.
