How fair a society do we live in? It’s a question that’s often asked and, depending on your world view, the answer often differs wildly.
Decision makers often like to tell us that we have never had it so good but even the best poker player would struggle to keep a straight face while claiming that we are all dealt the same hand.
One area where there is still much work to be done is the divide between the sexes. Despite talk that the gender gap is getting that much smaller, the evidence is clear that far more is needed to be done before the balance is truly redressed.
The gender pensions gap is a prime example of the stark gap; according to research by Prospect the union, the average female pensioner is £7,000 a year worse off than a man her age1. Changes to pensions policy will help but if we’re going to really tackle pensions inequality head on, then we really must look at the ‘motherhood penalty’ women face when they have children.
Our research found that after having children, nearly half of women reduced their hours, more than a third left work altogether and more than one in five returned to work in a lower grade or lower paid role.
According to a YouGov survey commissioned by The People’s Pension, after having children nearly half of women (44%) reduced their hours, more than a third (36%) left work altogether, while more than one in five (15%) returned to work in a lower grade or lower paid role.2
These changes in their working lives have a significant impact on a woman’s ability to save for a pension at the same level as their male counterparts. It’s hard to avoid the unpalatable fact that women are more likely to need to stop or dramatically reduce their pension contributions, meaning they may miss out on employer contributions and lose the investment gains their contributions would accrue.
While many women choose to reduce their hours or stop working because they want to spend more time with their children, many said it didn’t make financial sense to keep working and pay for childcare or they couldn’t afford childcare. Almost four in 10 women (38%) who returned to work on reduced hours after having a child would have increased their hours if childcare was more affordable.
We’re calling on ministers to redress the balance by recognising caring as an economic activity which should attract workplace pensions contributions from the Department of Work and Pensions as well as covering the real cost of the guaranteed 30-hours per week childcare for all three and four year olds with a single, specific earmarked grant.
It must also be remembered that workers who earn more than £10,000 from one job are automatically enrolled into a pension, which excludes many part-time workers. Reducing the auto-enrolment eligibility threshold from that figure to the National Insurance trigger of £6,240 would create 1.3 million savers – two thirds of whom would be women.2
We have been waiting long enough for a timetable for the removal of the lower qualifying earnings band, as recommended in the Automatic Enrolment Review of December 2017. This would mean that all those automatically enrolled contribute from the first pound of earnings, rather than the current figure of £6,240.
This would also mean all those earning below the earnings trigger who opt into auto-enrolment would be entitled to an employer contribution.
While we’re on the subject of government promises, before the last election, the Conservatives made a manifesto pledge to look into the ‘net pay anomaly’, which means that 1.75 million workers, three quarters of whom are women, miss out on pensions tax relief, which worked out over a career amounts to an eye watering £8,0003.
The list of demands currently placed before our decision makers is as long as it ever has been in recent history but we must not allow potential reforms that make life fairer for more than half the population to be kicked into the long grass.
Read more and download our full research report on the gender pensions gap.
- Prospect’s findings into the Gender Pensions Gap were published in 2018 here: https://prospect.org.uk/article/what-is-the-gender-pension-gap/
- Department for Work and Pensions figures show how many more people would be eligible for automatic enrolment if the earnings threshold was reduced from £10,000 from one job to £6,240: https://www.gov.uk/government/publications/automatic-enrolment-review-of-the-earnings-trigger-and-qualifying-earnings-band-for-202021/review-of-the-automatic-enrolment-earnings-trigger-and-qualifying-earnings-band-for-202021-supporting-analysis
- Freedom of Information request to HM Revenue and Customs in 2019 from Royal London revealed that 1.75 million workers would miss out on a total of £60 million in tax relief.