Three ways to help women achieve pension equality throughout their working lives
Women face pension inequality primarily for two reasons.
- They continue to be paid less than men.
- They typically shoulder more of the burden when it comes to childcare, and increasingly when caring for elderly relatives.
The road to pension parity
The introduction of auto-enrolment alongside supportive pay frameworks like shared parental leave and flexible working means women entering the workforce today are far better placed to ward off pension inequality than those before them. Unfortunately, they’re still not guaranteed an equal pension with men upon retirement.
The social norm of women working part-time or taking time off for childcare responsibilities won’t be balanced with men anytime soon, and while positive steps have been taken to address the gender pay gap, parity will not be realised for some years to come.
Recent changes will be of little help for women who are in the later stages of their career. Taking greater strides to pension parity is possible, but in the short term a lot can be done to help them make the most of their pensions.
How to create a more level playing field
Employers are well placed to help all their employees, here are three tips to start you off.
1. Don’t assume women aren’t interested
From time to time I hear the lazy assertion that women are just not as bothered with their pensions as men. Our analysis shows this to be completely false.
Women are equally likely as men to pay more into their pension. They’re also as likely to consolidate their pensions and to nominate who they’d like to benefit if they die. Men tend to be more likely to view their account online, but our analysis still shows almost four in ten women log in to view their workplace pension each year.
The real difference comes to the investment returns of workplace pensions, where men do seem to be more adventurous and women seem to be more cautious. This is a big issue as the investment returns of your pension are just as important as the amount you pay in to boosting retirement pots. In fact, tweaking pension investments can make people’s money work harder for them, particularly for younger members of the workforce.
What you can do
Offer a financial education programme alongside your workplace pension and help employees understand investing basics. Getting them interested in investing in the stock market can help them boost the value of their pension.
2. Avoid using bad language
One of the key reasons women don’t resonate with the investment side of pensions is that the industry does a bad job of communicating the benefits. It’s not just women that find the language difficult though, the industry does a bad job full stop. Communication is nuanced with certain words resonating better, or worse with each gender.
Take the word ‘risk’ as an example. This is littered throughout pension communications, often at the insistence of the regulator, but it means different things to men and women. Our research found only 14% of women relate ‘risk’ to opportunity, compared with 28% of men. Women are also more likely to relate the word ‘risk’ to loss, danger and uncertainty than men.
What you can do
Give your employees simple, jargon-free communications to help everyone understand their long-term benefits, and that focus on helping them to make better financial decisions. Your communications should run alongside your financial education programme as part of a sustained campaign for maximum impact.
3. Prioritise family planning
Much of the gender pension gap stems from mums taking on the majority of the childcare responsibilities, but often, there may be another member of the family to help plug the finance gap.
If both parents are employed, it’s worth making sure that both are making the most of employer pension contributions, by paying in what they can to get the most from the employer.
Non-earners can have a pension and get tax-relief too, and anyone can pay into it – up to £3,600 a year.
Parents, whether working or not, shouldn’t forget about state benefits. The state pension builds up for every year an employee works, or is caring for a child under 12 – as long as they’re registered for child benefit. A confusing quirk of the system means there’s no financial advantage to claiming child benefit where one parent earns £60,000 a year or more. But by registering for it, the non-working parent will still build up their state pension. Without registering, they won’t.
When things go wrong, make sure you’re supporting employees. A pension can often be a valuable asset when it comes to divorce, so don’t let your employee’s assets and opportunities get side-lined if things don’t go to plan.
What you can do
Make sure employees know what they’re entitled to from both the state and the company, in terms of pension contributions, parental leave and emotional and financial wellbeing support. Make it easy for staff to increase pension contributions and access financial and legal experts if needed.
The author is Nathan Long, senior analyst at Hargreaves Lansdown.
This article is provided by Hargreaves Lansdown.
In partnership with Hargreaves Lansdown
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