Equitable pension provisions fail to close gender pensions gap

• 91% employers are concerned about the growing retirement adequacy challenge

• 9 in 10 employers believe that their pension provisions are equitable

• Results reveal that career breaks can account for up to 20% reduction in pension pots

Research from Hymans Robertson has revealed that almost all employers (90%) believe that their pensions provisions are equitable with many confident they are doing a good job when selecting provisions. However, as the firm launches its latest report, Retirement adequacy: the true cost of the gender pensions gap in your workforce, the firms says that the reality can look starkly different, with equitable provisions falling far short of where they should be.

Key areas such as pay differences, career breaks and contribution structures are not being fully considered, warns the leading pensions and financial services consultancy, leading to a vast gap between perception and reality. The firm found that employees can face reductions by as much as 20% due to career breaks, with part-time working impacting by 15%. To reduce this, employers must weave gender equality into their retirement adequacy plans. While not always obvious, the impact of small changes must be understood to stop another generation succumbing to a gender gap.

Commenting on what is driving the gender pension gap, Mark Stansfield, Senior Actuarial Consultant, Hymans Robertson says:

“The pensions gender gap is a well-known problem for employers, however the results from our recent survey further detail the void between employer confidence and how the issue is being addressed. Our research showed that a career break (for example an extended maternity leave) could reduce a projected pension pot on retirement by as much as 20%, with a part-time working week similarly impacting by as much as 15%. 

“While employers may feel confident that they are doing all they can to help their employees, how it feels to the employee can be starkly different. It’s understood that female employees are more likely to have different working patterns due to caring responsibilities, not least maternity leave, and this compiled with a potential reduction in working hours is driving a significant gender pensions gap.

“Employers must take time to really understand the makeup of their workforce. From that starting point, the gender gap can be understood and any areas where inequalities are impacted can be addressed. This is the key starting point from which a successful strategy can be built. Before another generation is lost to such an inequality.”

Commenting on what employers can do to help tackle this issue, Hannah English, Head of DC Corporate Consulting, says:

“The gender pensions gap is not for employers to fix alone, but there are numerous steps that can be taken to allow employers to understand if they have a gap and what they can do to help. Employers must identify areas of their business that are more exposed to the risks of poor retirement adequacy and learn what they can do to mitigate this. Developing policies or strategies both within and beyond pensions can significantly reduce the risks retirement inadequacy could present to businesses. 

“Starting points could include reviewing flexible working and maternity policies whilst broader pensions design can follow. Reviewing diversity ambitions for their business, against the delivery of pension provision against these ambitions is vital to determining if an employer’s pensions offering to employees fully matches the wider aims of the business. 

“Our research clearly shows that employers want to offer equitable and fair pension policies, with almost all respondents having confidence that their pension provisions are equitable. Understanding where gaps are occurring, what can be done and how a successful gender strategy can be built are the next logical steps in the process. 

“It is understood that, on average, women live longer than their male counterparts, meaning many women are having to make their smaller pensions pots go further and last longer, affecting their expected outcomes in retirement. If employers can use this information as a starting point, they can give equal weighting to the various considerations that affect pensions adequacy and gender pensions gaps when shaping their pensions design and building a strategy that supports both their desire to provider equitable pensions.”

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