Globally women receive 26 per cent less income than men in retirement, according to new report from the OECD.
This international research looks at the gender pension gap across a OECD countries, and outlines clear policy actions to help address this imbalance. The figures in this report take into account funding from public and private sources.
The report, Towards Improved Retirement Savings Outcomes for Women, says there are a number of interconnected and complicated factors relating to society, employment, childcare and education that contribute to this gender pension gap.
The OECD says that while retirement savings arrangements cannot correct all of these factors, the design of pension should at least avoid increasing these inequalities.
Juan Yermo, chief of staff to the OECD Secretary-General says: “Still today, the design of retirement savings arrangements sometimes disadvantages women compared to men, for example when eligibility criteria based on working hours or earnings restrict plan access, when contributions stop during periods of maternity leave, or when women do not get their share of retirement benefit entitlements upon divorce.
“Policy makers need to account for and address the factors that can lead to gender inequalities, and should strive to design gender-neutral retirement savings arrangements”.
The OECD recommends key actions for policymakers which include:
- Increase the availability of these arrangements in industries predominantly employing women
- Relax eligibility requirements so more women are able to participate in retirement savings plans;
- Implement automatic enrolment and provide financial incentives for women to join and save in plans
- Tailor communication to women to raise their awareness of the importance of saving
- Allow flexibility for women to contribute to plans however and when they can
- Implement non-conservative default investment options to overcome women’s risk aversion
- Ensure women receive a fair share of the retirement benefit entitlements accumulated within a relationship
- Consider women’s longer life expectancies in the design of the options to provide retirement income from these plans.
Commenting on this report, Barnett Waddingham policy and strategy lead Amanda Latham says: “This year has reinforced the fact that progress can move backwards as well as forwards, as the pandemic has worsened the oppression of marginalised communities.
“As we start to ‘build back better’, women’s financial futures must be a core part of our agenda. The OECD’s finding are clear; biases in the private pension system have created a stark disparity in wealth between men and women at retirement. It is far too easy to put the burden on women to contribute more – it’s vital that the government and industry work to create a more robust and inclusive pensions framework, offering fairer solutions to all.”
She says that there are important insights in this report for employers in the UK.
“For employers, that means addressing the gender pay gap, setting higher default contribution levels for auto-enrolment, improving pay and benefits during and after career breaks, and introducing more targeted financial education.
“At a policy level, we must consider whether the auto-enrolment rules are fit for purpose, review the state pension provision and introduce more beneficial policies for those taking time out from the workplace to look after children and the elderly. All of this analysis should also consider intersectional identities – people who are gender non-conforming, people of colour, and people with disabilities are all likely to have differing financial needs. A ‘one size fits all’ policy will simply fail all – we must choose to challenge the system and improve it for everyone.”