The Government should introduce state auto-enrolment credits for career breaks and radically change the framework of occupational pensions to reduce the inequality of the widening gender pension gap, according to Hymans Robertson.
In an open letter to the Work and Pensions Select Committee, Hymans Robertson calls for the introduction of state auto-enrolment credits, highlighting that this could be done in tandem with two other, more widely supported measures: significantly lowering the AE earnings threshold to include more women on lower/part-time salaries, and removing the AE to pension offset from the first £1.
Auto-enrolment contribution credits would work similarly to how the government offers State Pension credits to selected people. These payments might be made on a yearly basis depending on a hypothetical earnings level. If earnings were set at £16,240, for example, the government would pay an auto-enrolment contribution of about £800 each year.
Hymans Robertson partner Chris Noon says: “It’s becoming increasingly clear that one of the primary shortcomings with the UK pensions framework is in the retirement outcomes for women, compared to those enjoyed by men. Evidence from the Pensions Policy Institute shows that this is largely due to the significant career breaks that many women take, as well as the higher prevalence of women working part time1. Introducing State auto-enrolment credits, alongside other measures to extend auto-enrolment, would make a significant difference in addressing the inequality.
“Figures in a House of Commons Library briefing on auto-enrolment published in February suggest that reducing the auto-enrolment threshold from £10k to £5k would bring over 800,000 individuals into the scope of auto-enrolment. Of these, around three-quarters of them (i.e. over 600,000 individuals) would be women.
“In our letter to the Select Committee, we outline these three key measures which, if introduced to auto-enrolment, would serve to level the playing field and begin to close the chasm. The government simply can’t ignore this inequality which is blatantly unfair to millions of women.”