The working lives of women is often very different to that of men. For a start it is often the woman in a relationship who will take career breaks to bring up a family and, typically, women more than their male counterparts will work reduced hours to accommodate child care and other care duties. And women are far more likely than men to be in part-time employment. Of 7.72m part-time workers 5.9m are women. These factors all contribute to a lower earning potential throughout a woman’s working life.
Add to that the gender pay gap and the picture becomes even bleaker. The most recent bulletin from the Office for National Statistics states that the gender pay gap, based on median gross hourly earnings (excluding overtime) for all employees (full-time and part-time)is 19.7 per cent.
So a double-whammy then. Women are likely to have worked fewer hours in total during their working lives than men and the pay that they get, on average, will be 20% less than their male counterparts. So where does that leave single women and their retirement income?
State provision, with private schemes following suit, was based upon the assumption that a marriage was for life and that the husband’s pension would meet the needs of both man and wife in their retirement. Today more and more women are reaching retirement age single and, consequently, do not benefit from the husband’s contribution to a pension scheme, as was initially envisaged.
Auto enrolment ought to be a positive step in improving saving behaviours for men and women alike. And since, when questioned, women are reported to be twice as likely as men to be concerned about their pension provision, auto enrolment offers a real chance to take control of their own retirement income. But will auto enrolment actually benefit women?
The current rules state that anyone with earnings above £5,564 will be eligible for assessment for auto enrolment. At earnings of £9,440 employees must be enrolled in a scheme and employers must make a contribution. So under the current levels low paid workers lose out. According to the TUC, half a million low paid workers are losing out on employer contributions and, as we have seen, 80% of these low paid workers are women.
Ann Flynn, expert in the field of pensions and specifically auto enrolment says, “since women are over represented amongst lower paid and part-time workers they should be the target group for auto enrolment and earnings triggers mean women will be the biggest losers as they lose out on employer contributions too.”
Ann adds, “ Women take career breaks for many different reasons and these breaks in employment may see them come into and then fall out of the eligibility criteria for auto enrolment. In assessing eligibility it would make sense to consider an annual snap-shot rather than track a moving target. Alternatively, there could be an earnings trigger that at least means employer’s contribute on behalf of low earners as the affordability issue is important.”
While lowering of the earnings trigger would benefit women, and indeed all lower paid workers, lowering the threshold would be very costly to the treasury. Since this is the case the threshold is likely to stay at £5,565 or higher so it is unlikely that auto enrolment will benefit low earners.
As Ann Flynn suggests, “cash ISAs may remain as a better savings product for women but as pension advisers we still face a massive problem in finding ways to encourage those on low incomes, those who find it most difficult to put money away each month, the majority of whom are women, to save in order to make some provision for retirement.”
So while auto-enrolment is increasing the number of people saving into a pension, it is clear that not everyone is benefiting from the policy, and the biggest losers are likely to be women.
Ann has over 20 years of experience dealing with employers and their workplace pension schemes, both as an adviser and in a provider role. She oversaw the development of Standard Life’s award-winning auto-enrolment communications and is a leader in this field.
For more information on automatic enrolment and pension consulting visit us on www.annflynnconsulting.com