Tackle covert discrimination in auto-enrolment
From the blog: In recent months, much attention has been given to the Women Against State Pension Inequality campaign. This has brought the issue of gender inequality in pension legislation into sharp focus.
But John Cridland’s review of the state pension age noted that while the new state pension will deliver equally for both men and women, it is in fact occupational pensions that are providing men with higher total pension income than women.
Tackling this covert sexual discrimination now is imperative before it becomes embedded in our pension system
The review finds that women are typically £60 a week (£3,000 a year) worse off than men in retirement, and that the situation will have got worse by the time Generation Y retires.
Auto-enrolment has a key role to play in bringing more people into pension saving, but a recent report from the Pensions Policy Institute revealed that while 7m workers have been enrolled, a further 6m have missed out.
The report says 3.3m of the people disbarred from auto-enrolment have been so because they earn less than the £10,000 auto-enrolment trigger, and more than three-quarters of employees earning less than the trigger are women.
In addition, more than 50 per cent of part-time workers earn less than the auto-enrolment trigger, and 81 per cent of part-time workers are women.
So, at a time when there’s a greater focus than ever before on ensuring equality, we find that our shiny new pension system is doing little to improve outcomes for women.
The other sleight of hand in auto-enrolment is that not all earnings are included in the auto-enrolment calculation for pension contributions. The legislation specifies that only earnings between £5,824 a year and £43,000 a year have to be included.
This disadvantages all workers, but particularly those working part-time and the low paid, as this chart illustrates.
| Annual salary | Pensionable earnings | Auto-enrolment contribution taking into account the impact of qualifying earnings |
| £10,000 | £4,176 | 3.4% |
| £15,000 | £9,176 | 4.9% |
| £20,000 | £14,176 | 5.7% |
| £27,000 | £21,176 | 6.3% |
| £40,000 | £34,176 | 6.9% |
| £50,000 | £36,561 | 5.9% |
| £60,000 | £36,561 | 5% |
These rules date from the start of auto-enrolment more than four years ago, and were put in place to help smooth the launch of the reforms.
But the pensions minister now has an opportunity to make changes, as he has a statutory obligation to conduct a review of auto-enrolment in 2017.
If he extends auto-enrolment to all workers and includes total earnings, he can significantly improve outcomes for all savers – but particularly women and part-time workers.
Tackling this covert sexual discrimination now is imperative before it becomes embedded in our pension system.
Morten Nilsson is CEO of mastertrust Now Pensions
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