One of the main ways women are penalised in pensions is by net pay schemes. These stop 1.2m low-paid workers (around 800,000 women) claiming tax relief worth around £72m a year.
This is an issue easily solved by @HMRCgovuk – but at the moment there is no progress #IWD2019
— James Coney (@jimconey) March 8, 2019
I have enjoyed International Woman’s day in Sri Lanka, but have been thinking about why we continue to make it so hard for woman in the UK to build up a meaningful pension pot.
Speaking as a man, I can see how pensions have been designed for my circumstances
- I have not had career breaks
- I have not worked part time while bringing up a family
- I have not been the wrong side of the gender pay gap
- I have a brilliant pension scheme in payment, the prospect of a state pension in ten years and substantial amount in retirement savings.
- Add to this the unequal opportunities available to men and not to women in the financial services industry.
- So I am on the right side of the asymmetry of pension information that favours men.
All of these advantages are menwards, it is the role of Government to redistribute to citizens disadvantaged by systemic imbalances and not to exacerbate the imbalances by punishing the needy.
James Coney’s tweet explains that the state, through the net pay system of pension contribution is actually making things worse for women when it should be making it better.
This shameful state of affairs is easily understood. Despite our Prime Minister’s declaration that she would be on the side of those just getting by, she has run her Government on an agenda of austerity for those on the outside and prosperity for those within.
Nowhere is this more apparent than in welfare and no injustice so touches me as the injustice of being promised an incentive to save and not getting it. That is what is happening to the 1.2m people who are auto-enrolled on a promise of 3+4+1 and find that the +1 Government incentive has to be found from their net pay!
The sums involved are – from the perspective of a civil servant on a decent salary with a decent pension accrual – small. Most of the 800,000 will be losing out on is £5pm from next month. But that £5pm is considerably more important if you are on a low income. From the perspective of someone on £12,000 pa, £5pm is meaningful saving.
Indeed it is the kind of savings envisaged by NEST’s Sideca project as the sort of savings increment that the Sidecar would encourage.
NEST is one of the occupational pension schemes that does not fall into the net pay trap. People’s Pension also avoids the trap as does the much smaller supertrust. In hindsight, it would have been possible to require all employer and multi-employer schemes to set up a section where members could have received the Government Incentive of an extra 25% of member’s contributions while the rest of the scheme remained Net Pay.
But that would have meant that the administrators of occupational pension schemes bucked their ideas up. It would have forced them to put pressure on HMRC to find a work-a-round for them so that the incentives could be claimed using the proposal that have been put forward to the Treasury by NOW Pensions and the low-paid reform group.
But that would have pre-supposed that the people running large occupational pension schemes thought the problem outlined by James Coney at the top of this blog was important enough to trouble them.
Sadly, like those in the Treasury , the people who run large occupational pension schemes tend to be in the kind of high paid stable jobs which make net-pay arrangements so attractive.
Which is why you will not see the net-pay problem on the agenda of the PMI conference in April
Which is why it was not on the agenda of the PLSA conference last October or this March
Why are women’s pensions smaller than men’s?
The simple answer is that it’s not enough people give a damn. That is shocking but it is true.
We will not get any change to the gender pension gap until we start addressing the fundamental inequalities that I outlined in the bullets at the top of this blog.
Which is why we need International Woman’s Day and why men should be every bit as loud as women in crying foul over the ongoing inequality of the pension net pay fiasco.