Prospect’s Sue Ferns proposes solutions to tackle the gender pensions gap ahead of the Work and Pensions Committee’s hearing on this topic, as she warns that more needs to be done by the government to tackle the issue.
Let us be clear — income inequality is one of the most fundamental forms of inequality and it has numerous detrimental impacts on women and society in general. The pensions gap is the manifestation of income inequality by gender for millions of people in retirement.
As part of its ongoing inquiry about issues affecting pension savers, the Work and Pensions Committee has asked whether the government could be doing more to close the gender pensions gap.
The government is hardly even doing the bare minimum to tackle this issue, so it absolutely could and should do more.
The government must be required to produce its own estimate of the gender pensions gap and report to parliament on an annual basis about its plans for tackling it
Research by Prospect shows that the gender pensions gap is more than twice the level of the gender pay gap. Its relatively low profile also means that most women are unaware there is even an issue until they reach retirement age when there is little they can do about it.
What should the government do?
In my oral evidence to the committee on March 23, I will emphasise some practical suggestions that Prospect has made in previous reports about the gender pensions gap.
First and foremost, the government must be required to produce its own estimate of the gender pensions gap and report to parliament on an annual basis about its plans for tackling it.
What gets measured, gets managed. Also, an official government estimate of the gender pensions gap, along with an annual debate in parliament, will give this issue the higher profile that it badly needs.
In the absence of an official estimate, Prospect has produced its own analysis of the level of the gender pensions gap based on data sets from the Family Resources Survey — showing that it was 37.9 per cent in 2019. We will be glad when this work is eventually superseded by the government’s own analysis.
Second, the government must set an objective to close the gender pensions gap. It almost beggars belief that none of the Department for Work and Pensions’ current equality objectives covers income inequality in retirement. This must be rectified immediately.
Third, there needs to be better monitoring of this issue by the Equality and Human Rights Commission and the Government Equalities Office, and others. The EHRC should consider whether the secretary of state’s failure to address the gender pensions gap amounts to a breach of her statutory duties under the Equality Act.
Wider policies needed
Putting the right framework to monitor the gender pensions gap in place is important, but practical policies will also be needed.
Wider policies to tackle the gender pay gap will eventually have an impact of the gender pensions gap too. The new state pension system, introduced in 2016, will also bring forward the date that women start to retire with the same average state pension as men.
But the gender pensions gap is also a product of specific features of the pensions system that require specific pension policy responses.
By far the biggest driver of the gender pensions gap is the impact of caring responsibilities. Policies that seek to support equal sharing of caring responsibilities will also address the gender pensions gap, but it seems likely that the burden will continue to fall disproportionately on women for some years to come.
Therefore, my fourth suggestion is for better recognition of caring responsibilities in the pensions system.
There are a number of ways this could be done, and each have their own merits. Prospect’s preferred approach is for an additional state pension credit for anyone who is out of the workforce (and hence missing out on accruing an occupational pension) because they are caring for a young child or an ill relative.
Last, it is important that the pensions system does not discriminate unnecessarily. Women are disproportionately excluded from automatic enrolment because of the earnings trigger. When the contribution structure for auto-enrolment is revised, the earnings trigger should be reduced — perhaps to the starting level for national insurance contributions.
I am glad that the committee is highlighting the issue of the gender pensions gap, and I hope its ultimate report makes strong recommendations to the government for tackling it.
Sue Ferns is senior deputy general secretary at Prospect.
