Caught in a gap – the role of employers in enabling women to build better pensions
12 Dec 2022
Abbie Winton, Research Fellow
Claudia Plowden Roberts, Research Fellow
Jade Talbot, Research Officer
Current predictions suggest that, on average, a woman in the UK will retire with £51,100 in her pension pot, compared to a man’s £156,500 – a worrying statistic that forms part of an important, but often-overlooked area of equality policy: the gender pensions gap. However, new IES research, commissioned by Phoenix Insights, has found that UK employers have a limited understanding of the causes and consequences of this gender-based financial disparity. While employers accept that gender equality issues are an important consideration when setting workplace policy, there is a lack of action over and above the statutory minimum. Therefore, how best can employers support the future savings capacity of women across different life stages?
In response to growing concerns about the gender pension gap, IES explored women’s finances and savings through the lens of the workplace and lifetime employment journey, recommending actions that employers can take to help achieve sustainable, long-term improvements to gender equality and the gender pensions gap.
The research finds that the gender pay gap exacerbates the gender pensions gap, as men earn more and are therefore able to make higher contributions into their pension over their lifetime. Furthermore, women are more likely than men to fall beneath the automatic enrolment threshold (yearly earnings of £10,000), meaning that many are not contributing to their pension at all. When they are able to contribute, women contribute a similar proportion of their salary as men do, but since they are paid less, the value of these contributions is ultimately lower. This causes the gender gap to grow throughout the female life course, where the gap in pension contributions peaks in the 40s (£245 for men, compared to £165 for women).
What action can employers take to close the gender pension gap?
1. Support for flexible working
Flexible working can be used to support people to manage care and other needs alongside paid employment, allowing these individuals (disproportionately women) to remain within the labour market.
Encouraging greater equity in the uptake of flexible working is likely to have a positive impact on both the gender pension and pay gaps, since it can help support the progression and movement of women into more highly paid roles. The uptake of flexible working within organisations could be further normalised by encouraging greater uptake among senior members of staff and men, groups who are currently less likely to take up these working arrangements.
The new legislation requiring employers to make flexible working accessible from day one is welcome. Also welcome is government recognition that flexible working does not just include working from home, but a wide variety of adjustments such as job-sharing, flexible hours (flexitime) or staggered hours. All of which may help ensure flexible work is more accessible and inclusive, as well as providing potential recruitment benefits to employers in the context of a constrained labour market.
However, greater engagement from employers is needed to further normalise flexible working, additional measures employers can adopt include: encouraging all employees to be transparent about their working hours; encouraging senior male employees to visibly adopt flexible working; allowing for flexible working contracts to be changed more frequently than once a year; as well as encouraging flexible working discussions at line management meetings.
2. Support for carers
As the gender pay gap data demonstrates, women suffer a long-term pay penalty for part-time working – while the full-time pay gap is currently 8.3 per cent, the pay gap across all workers is 14.9 per cent. Therefore, offering enhanced parental leave and other flexible working arrangements is likely to support individuals to manage caring responsibilities alongside paid employment.
Carers UK has also found that one in four women aged 50 to 64 have caring responsibilities for older or disabled loved ones, while CPP found that one in five women have reduced their working hours as a result of adult caring responsibilities. In acknowledgement, employers should adopt a minimum of five days unpaid leave for those with childcare responsibilities yearly, in addition to five days paid carers leave where possible.
3. Support managing health conditions and menopause
Among employers actively working towards improving gender equality, there was a view that menopause policies improved visibility and support for women in the workplace.. There is a clear need for this support: the Fawcett Society has found that one in ten women leave the labour market due to menopause. Similarly, for women undertaking fertility treatment, 50 per cent were concerned it would affect their career prospects, while 35 per cent felt it materially affected their career prospects. Furthermore, by engaging men on women’s health topics, employers felt it was more likely that their policies would be embedded consistently within organisational practice.
Employers should therefore implement a holistic health management policy programme that outlines support available for reproductive health conditions such as miscarriage, fertility treatment, for those diagnosed with endometriosis, and managing menopause symptoms.
4. Revising pensions policies and practices
Gathering and analysing data on the gender differences found in pension participation was not the norm for employers in our research. However, one employer who undertook analysis of pension opt-out rates found that these were higher among people from ethnic minority backgrounds. Therefore, in an effort to improve pension participation across ethnic groups, the decision was made to re-enrol all employees every year. While this is not directly related to the gender pension gap, organisations taking a similar approach could help close the gender pensions gap by encouraging women who have opted out to re-enrol at regular intervals.
Employers should also ensure contributions to pensions continue for employees during periods of parental leave and actively highlight to all employees, that partners, family, or others can make additional contributions to support. Throughout all life stages, employers should aim to set pension contributions at a level that will enable employees to achieve a good standard of living at retirement. This could also be supported by engaging with the work of the Living Wage Foundation and becoming a Living Pension employer. This would mean committing to a minimum contribution level for all employees, outlined by the Resolution Foundation.
If women are not given the additional support that they need to remain in paid employment throughout the different stages of their lives, their ability to contribute enough to their pension to guarantee a good standard of living in retirement will suffer. Employers are ideally situated to help address the gender pensions gap through organisational policy and practice. Furthermore, the potential benefits of employers acting on these recommendations are likely to be felt beyond the gender pension gap and could work towards furthering the agenda for gender equality.
Any views expressed are those of the author and not necessarily those of the Institute as a whole.