Closing pension gaps key to improving DEI
For employers that are focussed on closing gender pay gaps, eliminating pension gaps is a key step in helping to address this issue. Without action, the reputational risk to employers that claim to be inclusive could potentially be huge.
Most commonly, pension gaps occur when a parent takes time out of the workplace for parental leave, leading to a reduction in pension contributions. In this extract, taken from REBA’s DEI Benefits Research 2022, we take a look at what is currently being done to address pension gaps.
Pay and benefits for women
Employers are much more likely to carry out checks on the inclusivity of aspects of the workplace and pay and conditions along the lines of gender than by age, ethnicity/race or parent/carer status. This could be an outcome of legislation in this area – particularly the introduction of mandatory gender pay-gap reporting.
Financial inclusivity is a particular concern, with only 22% of employers identifying pension contribution gaps (and only 5% doing so for ethnicity), and 18% checking workplace financial products. The gap in pensions savings between women and men – and therefore the quality of retirement that they can expect – is significant. In 2021, Scottish Widows estimated the average gap is £185,000 at retirement.
Workforce in focus: parents and carers
While being a parent or carer is not a legislated protected characteristic in the way that gender, age, ethnicity, religion and so on are, it can hold disadvantages in the workplace, and encompasses a high proportion of workers. According to Carers UK, one in eight adults (around six and a half million people) are carers, with 58% women and 42% men. Every day, another 6,000 people take on a caring responsibility – that equals over two million people each year.
Therefore, we were curious to find out whether any employers check equity in pay, bonus or pension contribution levels according to whether an employee is a parent or a carer. It appears that very few do, with roughly one in 10 checking pay and bonus levels and a mere 2% checking on pension contributions. This may come down to availability of data, but this blind spot is almost certainly the source of many ongoing gender pay and pension gaps. Spotting problems early could solve larger financial injustices later in careers. Also, parents and carers tend to bear increased costs in supporting families, so are more likely to face financial challenges – not helped if they fall behind in the remuneration and career progression stakes.
Supporting pension top-ups
There are significant financial implications to parenthood, from lost pension contributions during maternity or paternity leave, through to the cost of time away from the workplace to cover childcare duties.
Benefits such as vouchers and one-off day care cover the cost of childcare in the short term (80% of respondents either already provide this or intend to in the next two years), but only around half of employers have considered longer-term financial wellbeing, such as pension top-ups during parental leave (41% currently offer this) or paid carers’ leave (31%).
Helping employees to continue to save for retirement during parental leave is highly valued by employees. Of the 41% of companies that offer pension top-ups at present, 65% rated them as extremely effective at improving DEI.