Expert View: As Pension Commission returns, how will employers react?

Tackling the gender pay gap effectively, is critical if we want to close the gender pension gap.

New government analysis reveals a 48% gender pensions gap in private pension income between women and men.

On average, woman currently approaching retirement can expect this to provide just half of that of their male counterparts, with £100 per week and £200 a week for a male.

Despite workplace auto-enrolment, pension adequacy is an issue for all. The figures reveal:

> Retirees in 2050 are on course for 8% less private pension income than those retiring today.

> 4 in 10, nearly 15 million people are under saving for retirement, with 45% of working age adults saving nothing at all into a pension.

> Only 1 in 4 low earners in the private sector are saving into a pension, more than 3 million self-employed are not saving and there are further disparities between ethnic groups.

The impact individually and to society as a whole is significant, with Scottish Widows predicting that 42% of women risk facing poverty in retirement, and 35% of men.

The government has announced that the Pensions Commission, which introduced auto-enrolment, will be revived, to examine why tomorrow’s pensioners are on track to be poorer than today’s.

Good governance and risk management

Employers should pay attention to pension adequacy and understand how employees being unable to afford to retire, will affect their succession planning and talent management.

Employers can measure their gender pension gap as a first step, log this on their risk register, and include discussion of pension gaps in pension and broader governance reviews.

The battle for hearts and minds

In a world dominated by Instagram and Facebook, psychologically people are a lot more focused on today than tomorrow. Women’s can often prioritise family over themselves.

With the removal of a fixed retirement age, it is becoming more of a norm to assume working into later life – but health doesn’t always allow this.

Many employees may have the affordability to increase pension contributions but need to be convinced to save.

Women do not always have the awareness that their retirement journey may be different to men's. They underestimate their life span by seven years.

There is also insufficient understanding of the impact of relationship status: being single, divorced or an unmarried partner, on pensions.

Women often don’t save enough ahead of motherhood to offset the impact of nursery costs, loss of income through part-time hours or costs of parental leave or childcare during school holidays.

Gender pay gap driving the gender pension gap

The bottom line is, the less you earn, the less you have to save. This is fundamentally impacting women’s retirement savings.

Many accept work below their skill set and on reduced pay, in return for flexibility. It often takes women longer to reach the same career point and earnings as men and then they have less time at this earnings level before retirement.

Tackling the gender pay gap effectively is therefore crucial. The Government is consulting on mandatory gender pay gap action plans, which should be a catalyst to review the effectiveness of gender pay gap planning.

Accuracy: We often find errors in client’s data or the elements of remuneration being included or excluded in gender pay gap calculations. Utilising a third-party calculation tool can save organisations the time and expense of developing this in house and lead to more accurate reporting.
Insight: Going beyond the mandatory gender pay gap calculations to identify outliers and segmented groups experiencing the highest pay gaps can move action planning from best practice to specific actions targeted to your own workforce and underlying drivers. For example, our analysis may include:
- Comparing home workers to office based – is visibility having an impact on careers and earnings?
- Comparing sales and non-sales teams – is bias creeping in when performance is less measurable?
- Analysis of the gender pay gap between those on the same job grade – understanding the reasons behind this and how salaries are set

Those with workplace salary sacrifice pension plans, will have pension contribution data already, to conduct the gender pay gap hourly rate calculations. So going the next step and calculating a pension contribution gap will be an easy job.

Actions with real impact might include:
- Signing the End Salary History- The Fawcett Society pledge – paying women what they are worth – not perpetuating historic low pay.
- Job design – enabling higher paid roles to be conducted on a part time basis.