The UK’s pension system is failing “invisible women” who do not meet the auto-enrolment earnings threshold and are punished for leaving work to care for children, Labour peer Patricia Hollis has warned.
The former pensions minister urged the current crop of policymakers to reduce the trigger, protect the triple lock and introduce flexibility to rules surrounding the tax-free lump sum in order to combat female pensioner poverty.
It’s how we in society want women to work and live and then we punish them for it
Patricia Hollis, House of Lords
Both coverage and adequacy are commonly cited as concerns arising from the current auto-enrolment defined contribution system, with self-employed, gig economy and low income workers seemingly destined for poor retirement outcomes.
But Hollis added women to that cohort in a speech at the ‘People and pensions: a decent retirement for all’ conference by the Trades Union Congress on Wednesday, arguing the current system has been designed by men to suit a male life pattern.
“You couldn’t design, in my view, a worse fit for women in pensions if you tried,” she said.
A system built for men
Despite divorce rates declining slightly over the past decade, and the introduction of pension sharing at the turn of the millennium for which she was a driving force, Hollis argued that women can no longer depend on spouses or partners for retirement provision.
Because many mothers choose flexible work, sometimes with multiple employers, to meet their childcare commitments, they are often missed out by the auto-enrolment earnings trigger, currently set at £10,000 from a single job.
Meanwhile the financial pressures of parenting can mean that women who are enrolled opt out of their scheme.
“Half of women end their pension contributions after childbirth,” said Hollis. “It’s how we in society want them to work and live and then we punish them for it.”
The peer also argued that the current rules around freedom and choice have not helped mothers on low incomes, who may need to access their tax-free lump sum earlier in life to “smooth working life volatility”.
Solutions in sight?
In response to this plight, Hollis recommended legislating for blended retirement products which would allow flexible access, alongside a lowering of the auto-enrolment trigger and protecting the triple lock as a state safeguard for female pensioners.
However, she conceded that these changes are unlikely to be made soon, with Brexit and other domestic issues predicted to take up parliamentary debate time.
With a lack of awareness about the plight of female savers, she said many women are “invisible” to lawmakers in the Commons.
Political will may also be against the recommendations. The maintenance of the triple lock until 2020 is a manifesto pledge, but the Work and Pensions Committee last year called for the “unsustainable” policy to be scrapped.
Threshold concerns
Past research from the Pensions and Lifetime Savings Association has shown the significant impact that removing or reducing the earnings threshold would have on retirement outcomes, especially when coupled with higher levels of combined contributions.
Increased contributions vital to continue AE success story
The real tests of auto-enrolment are still to come, one of the architects of the initiative has warned, as an adequacy report found many DC-reliant members of Generation X are already beyond auto-enrolment’s help.
But such a move could also have unintended consequences. Daniela Silcock, head of policy research at the Pensions Policy Institute, said “grave concerns” had been expressed that “means-tested benefits are reduced because you have a savings pot”.
She recommended that more research is done into the situation and behaviour of low-income workers, about whom she said relatively little is currently known.
“The answer really is not necessarily to lower or raise the earnings threshold, it’s to do better analysis.”
For Christopher Brooks, senior policy manager at charity Age UK, that issue could be solved by good quality guidance and advice.
“We’ve long been calling for a lowering of the earnings threshold,” he said. “That would bring a lot more people into auto-enrolment.”
Despite benefits issues falling outside the remit of bodies like Pension Wise, he said they could be resolved by “effective signposting from Pension Wise onto Citizens’ Advice and others”.
