Why it is important to raise awareness about the Gender Pension Gap?
While marking International Women’s Day, it is important to add our voice and raise awareness about the persisting Gender Pension Gap and the societal implications arising from it.
What are the reasons for the Gender Pension Gap?
Different studies and research, both domestic and international ones, show that the reasons for the gender pension gap are complex and multi-faceted. There are many reported actions that lead to a gender pension gap and lower pension income for women in retirement. By far the most impactful however, is the fact that women are less likely to receive supplementary pensions due to lower income work and part-time work or extended periods out of the workforce in care giving positions (gender roles). Many women lose important pension contributions when on maternity, parental or other carer leave as much of this is unpaid breaks, therefore, there are no salary contributions to their pension.
What are the most recent gender pension gap trends?
The latest European Insurance and Occupational Pensions Authority (EIOPA) Eurobarometer survey from 2023 showes a persistent gender gap in insurance and pension access, leading female EU consumers to be 10 percentage points less financially confident about retirement than men. Across the EU, the percentage of female consumers having one or more insurance or pension products or participating in an occupational pension scheme is lower than male consumers.
The implication from a lower access to insurance and pension products for female EU consumers is that women are less confident about being able to live comfortably through retirement with only 7% of female consumers (vs 10% for male) being very confident and 30% (vs 37% for male) being confident.
How to combat the Gender Pension Gap?
It is important more is done to improve the financial literacy of women and, at all stages of their working and personal lives, inform them about the options available to them in pension planning and how to avail of them. By empowering and informing women, they will be in a position to be more confident and have a better control over their financial future.
Proposals for introducing a module for secondary school children on personal finance, including saving and investing for retirement as well as the types of benefits available in retirement, as recommended by the Pensions Council in 2022, would also help to close the existing gender pension gap.
Finally, pension providers and advisers also have a role in empowering women and could carry out gender-proofing in new product/service approval processes and product reviews. There is a risk financial advisors may be inadvertently or subconsciously influenced by gender bias, and this can reinforce women’s affliction towards risk aversion by steering them towards conservative investment which ultimately would affect their income at retirement.
Is the upcoming Auto-enrolment scheme gender-proofed?
Based on analysis by Insurance Ireland on the 2022 Auto-enrolment (AE) Design Principles and the AE General Scheme published in 2023, it could reasonably be argued the proposed AE scheme, unless it is significantly changed with the upcoming Bill, would not contribute to closing the gender pension gap as it is inherently discriminatory against women.
The Design Principles did not go far enough to ensure fair treatment of carers, part-time and low-income earners, which are predominantly women, and they do not make any effort to mitigate the existing gender pension gap. We would like to see the minimum entry threshold (currently €20,000) removed as this would be a major step to ensuring carers, part-time and low-income earners, predominantly women, have increased access to the scheme.
It is very important the system works for those who will take maternity/parental leave or who would like to top up their pensions. More and more, employers are becoming aware of the additional support needed for women in the workplace, particularly in the affordability of maternity leave.
We strongly believe that the upcoming AE scheme could make significant inroads supporting the mitigation of the gender pension gap if designed in a progressive and future focused manner, not simply to support the ‘status quo’.
