Gethin Nadin

Gethin Nadin

Chief Innovation Officer

Despite a lot of column inches and media attention, the gender pensions gap is now as high as 50% in some parts of the UK – more than twice the gap between average earnings, according to Profile Pensions. While auto-enrolment significantly changed most employees’ pensions savings, the data tells us that women are less likely to be in a pension than men – regardless of age. And although societal and policy changes will see women today get a better deal than their mothers and grandmothers, women are still 80% more likely to be in poverty after retirement than men, and that’s a worrying statistic we must change.

There is no doubt that the pandemic turned the clock back on women’s equality in the UK. In many of the industries that saw large job cuts, women were losing their jobs at a disproportionately higher rate than men who work in the same field. Almost 80% of those that lost their job since the pandemic began were women. This paints a bleak picture of the gender pensions gap as we look towards the future, meaning employers must start to act now to close a door that is slowly being opened.

Understanding the pensions gap

If employers really want to close this gap, we must first be very clear as to why the gap exists in the first place. There are generally three main drivers behind the gender pension gap:

1. Contributions

Historically, men have been more likely to be offered a pension in their role and are more likely to work for an employer that contributes more money to their pension. In addition, the State Pension isn’t exactly fair. The amount of State Pension someone gets is largely based on the number of years they have worked and National Insurance credits they’ve received during time off for parenting or caring responsibilities. However, this only applies only if you are entitled and they are claimed.

2. Different labour market experiences

Different experiences mean that there is a gender pay gap, and men tend to have longer paid working lives than women. Women are also more likely to work part-time. For auto-enrolment, you must earn more than £10,000 a year, which means because women are more likely to be in a lower paid or part-time role, they are less likely to be able to be auto-enrolled into a workplace pension.

3. Financial education

Men are more likely to be offered workplace financial education than women. It’s easy to see how this might happen as caring responsibilities and increased likelihood of part-time work might prevent women from attending financial education workshops.

4. Different investments

Men and women appear to choose different portfolios with differing returns.

5. Attitude to money

Unsurprisingly, based on how society has stacked the cards against them, research indicates that women are twice as likely as men to associated negative emotions with their finances.

How can employers help?

While efforts to reduce the gender pay gap along with additional societal and policy changes will have an impact, there are five main ways in which employers can support women in the workplace, to ensure they have a retirement plan in place.

1. Encourage higher contributions

Even if they are small. The latest analysis from Scottish Widows shows that the average woman would need to increase their pension contributions at the start of their career by 5% in order to close the pensions gap. Modelling by Nest shows that small steps like paying an additional £2.50 a week into a pension pot could grow it by a large sum. The pandemic caused an almost 11% drop in UK workplace pensions savings, according to data published by the Office for National Statistics in January 2021. So getting this back will be critical to women who may have dropped their contributions during this time.

2. Show the payback of a pension scheme

The Behavioural Insights Team’s Nudging for retirement report has shown that when we are able to articulate to employees the payback of saving for a pension, contributions and engagement increase. For every £1 an employee pays into their workplace pension scheme, the final pension is £2.04. Showing the financial benefit of this investment vehicle is a great step towards encouraging women to contribute more.

3. Consider gender-specific financial education

Just 46% of women in their 20s are saving the recommended minimum of 12% of their monthly pay compared to 56% of men. We need to support women specifically to become more confident in their pensions knowledge. Women who take time away from work will have gaps in their National Insurance (NI) contributions and may struggle to get a full pension. By not registering for child benefit, a stay-at-home mother will not clock up much needed credits towards their state pension. We need to ensure that our female employees fully understand and keep track of their NI contributions.

With Aegon’s 2020 Financial Wellbeing survey revealing that seven out of 10 employees want better financial education at work, your female employees of all ages are turning to you for help.

4. Show women the kind of lifestyle current savings might lead to

Pension plans are often difficult to understand and dealing with them involves time and effort. Retirement planning requires an anticipation of our lifestyle, income calculations, the forecasting of financial risk etc. Percentages are used a lot in financial services – especially in workplace pensions, but this requires an extra level of figures and complexity in our decision making.

When asking employees how much money they should add to their savings on a regular basis, the Behavioural Insights Team’s Nudging for retirement report found that showing a percentage of their salary was the least effective method. However, showing the monetary value in pounds had the highest engagement, as well as showing what kind of a lifestyle could be obtained with different pension pots. The PLSA Retirement Living Standards can help to give you an understanding of income levels and associated lifestyles.

5. Pay attention to younger women in your workforce

Half of 22–29-year-olds are still not saving enough for a retirement above the poverty line, and a general lack of engagement in retirement planning among younger employees is more prevalent among younger women, found the Behavioural Insights Team’s Nudging for retirement report. While analysis from Scottish Widows reveals one-in-five women under the age of 25 say they have not started thinking about retirement. Young people in particular say they are confident they are not doing enough for their retirement.

Final thoughts – consider wider options

There are also some less obvious ways employers can support their women to close this gap. Employers should commit to additional measures aimed at making childcare more affordable and more widely available, so that those women who wish to return to work are able to – which includes encouraging the uptake of shared parental leave.

Employers should also embrace flexible working. The pandemic gave many women who had the ability to work from home the opportunity to better balance home and work commitments. By embracing this, we are creating a workplace that is more attractive and successful for working mothers, but also freeing up time for fathers and husbands to shoulder more of the home responsibilities, enabling women to have more time to focus on their finances.

Many of the actions employers are being encouraged to take to close the gender pay gap may also be beneficial to the pensions gap. Ensuring women are being recruited to senior positions, encouraging salary negotiations, introducing transparency to pay and benefits, and ensuring diversity runs through your pension and benefits comms and strategy will all help to have an impact on women of all ages.

As with all financial wellbeing priorities, closing the pensions gap relies on two key elements: we must start the conversation, and we must commit to change.

Originally posted on REBA

Gethin Nadin

Gethin Nadin

Chief Innovation Officer

Gethin is an award-winning psychologist who has been helping some of the world’s largest organisations to improve their employee experience and wellbeing for more than two decades. The last 11 years have been spent working as part of the senior leadership team at Benefex where Gethin leads thought leadership as Chief Innovation Officer.

As a frequent writer and speaker on employee experience and employee wellbeing, Gethin has been featured in Forbes, The Guardian, The Sun, The Huffington Post and The Financial Times as well as all major HR, Reward and Pensions publications. Gethin has been listed as one of the world’s top 101 Global Employee Experience Influencers for the last two years running, is listed on the Employee Engagement Powerlist, is one of LinkedIn’s top global contributors and an Inspiring Leader 2021. Gethin is also a regular keynote speaker, ex-Chair of Wellbeing at the UK Government-backed Engage for Success and a Fellow at the RSA.

In 2018, Gethin published his first book - the HR bestseller ‘A World of Good: Lessons From Around the World in Improving the Employee Experience’, which has gone on to inspire HR and Reward teams at some of the world’s best known brands. In early 2022, Gethin co-authored his second book ‘Das Menschliche Büro - The Human(e) Office’ a collaboration between leading academics and workplace professionals from across Europe. In October 2022, Gethin published his “third” book ‘A Work In Progress: Unlocking Wellbeing to Create More Sustainable and Resilient Organisations’ which also became an immediate bestseller.

A World of Good: Lessons from Around the World in Improving the Employee Experience
A Work In Progress: Unlocking Wellbeing to Create More Sustainable and Resilient Organisations