Pension problems for women
The field of pensions has a number of general issues such as overall coverage and adequacy that are not gender specific but statistics show that women tend to be in a far poorer position when it comes to retirement than their male counterparts.
The gender pay gap, which is approximately 13.5% in Ireland, has been widely reported as being an issue that needs to be resolved. A statistic that receives far less attention is the gender pension gap which is 39%. This means that in retirement a man is 39% financially better off than an equivalent woman.
The question of how the gender pay gap almost triples in retirement is something that has not received the attention it deserves and is a massive concern that the pensions industry and Irish society as a whole must tackle and rectify.
There are a number of problems facing women planning for retirement that could have a role to play in the size of the gender pension gap:
1. Pay disparity
2. Gaps in employment history
4. Trustee board composition
The fact that women are paid less than men feeds into their ability to proactively save for retirement. Less pay means that smaller contributions are made to pension schemes or the ability to set aside discretionary pay for retirement is reduced or eliminated entirely.
Gaps in employment history
Women tend to have more gaps in their employment history than men. The main "gap" that women experience is maternity leave. Time taken off as maternity leave can result in women losing the opportunity to save for pensions for large periods of time.
If remuneration continues during maternity leave then pension contributions must continue as normal. If the employer does not continue to pay an employee during periods of maternity leave then there is no obligation to continue making pension contributions during the period of absence. In addition, an employer does not have any obligation to make pension contributions if the period of maternity leave extends beyond the statutory period of 26 weeks.
Any periods of leave taken from work, such as maternity leave, can result in large amounts of time where no pension contributions are being paid. This will have a detrimental effect on the amount of benefit that will be paid during retirement.
It would be fair to say that the majority of the population balks when reference is made to pensions or retirement planning. A recent survey conducted by the Irish Brokers Association seems to point towards the existence of a knowledge gap between men and women when it comes to an understanding of pensions.
In that survey 55% of men responded that they had "no" or "some" knowledge of pensions whilst that figure rose to 73% for women. It is clearly an area that requires further investigation but it is a perceived problem in the industry.
Trustee board composition
Pension funds are managed by trustees which tend to be either corporate entities or boards made up of representatives of the employer, trade unions and employee bodies.
Trustee boards tend to be composed of more men than women. In the UK, the level of female representation at trustee board level is very low at roughly 25%. The level of participation in Ireland is unlikely to be any better.
This can be problematic for pension schemes as decisions made by the trustees such as on investment or the payment of benefits can be weighted towards the male membership. All of this combines to make a pension scheme less attractive from a female perspective.
There is no quick fix to the problems facing women in the context of pensions. Many of the issues facing women are part of wider societal issues and will have to be addressed as part of a cohesive Government strategy.
We would suggest that some of the issues experienced by women can be alleviated somewhat by taking the following steps:
- Pay – If the gender pay gap is closed the amount of remuneration that women can set aside for retirement will improve.
- Service – The situation would immediately be improved if pension contributions (employer & employee) continued during periods of maternity or carers leave. This would require a legislative change and care would be needed so that any change does not inadvertently make it more expensive and less attractive to hire a female worker.
- Trustee Board Diversity – Trustee Boards need to embrace gender equality. This would improve the way in which the pension scheme is managed and communicated to all members. The concept of introducing gender quotas for trustee boards is one that has been raised if the passive encouragement of gender diversity fails to gain the required traction.
- Communication – The pensions industry produces tailored communications based on broad age cohorts. The same concept could also apply to the production of gender-specific pension communication materials. Documents such as the member booklet could easily be tailored to meet the specific needs of the intended audience. The majority of pension advisers are men. Pension providers should be encouraged to hire more female pension specialists who could assist in designing and communicating pension information in a manner that meets the needs of a female audience.
The suggestions listed above will not solve the problems women face when trying to plan for retirement but will definitely amount to a significant step in the right direction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.