The gender equality gap has become a cause celebre for the marketing departments of pension companies. We’ve had it from the ABI in their blueprint for auto-enrolment 2.0, from Hargreaves Lansdown who reckon that women are under pensioned from the womb and from L&G who want to jack up AE contributions to even things up for working women.
I’ve got a big file on my laptop full of similar reports from Scottish Widows and other insurers earnestly entreating us to reform the pension system so that women’s pots are as big as men’s pots. But as L&G bemoan, progress towards pot equality has been “glacially slow”. The trouble with that cliché is that glaciers are disappearing very fast, as is my patience with the idea that women are all of a sudden going to have earnings careers like men.
We can get women a fair deal on pensions, but it won’t be through defined contribution pensions. It will be through thinking of pensions as belonging to households – rather than individuals.
There are areas where pensions are thought of as households, pension credits are calculated based on household needs. Most state benefits are assessed on household rather than personal income and this is why the majority of assistance is channelled towards households where there is a dependence on a single income.
This is a good model to start thinking about how pensions can work for women. Women in relationships with husbands and partners (of either sex need to be able to consider the joint household income a joint asset. This is particularly the case when relationships that led to two people living under one roof – end. This happens more and more when couple are in retirement, divorce and separation are not the exclusive misery of youngsters.
But settlements when households split (especially when there is no formal marriage), often leave pensions out, which means that women are almost always the losers. Too often, men walk away with the big liquid asset – the pension, while women often find themselves reliant on scraps earned from careers of caring – but not earning.
This is where financial education really can be useful. I’m not talking about the Janet and John stuff advocated by pension providers (which focusses on saving more and not much else). I’m talking about a man taking responsibility for the retirement of both himself but his other half (this goes for married and common law husband and for a lot of gay relationships too.
The kind of things that men should be thinking of start with life assurance – in trust for the partner and continues with pension planning for two, that means thinking about what the household income needs are and it means thinking about what will be left over if the principal earner dies first.
It also means women being surer of their ground so they can demand protection from their partners both while he is working and after he stops. It means her being aware to an ongoing right to a proper share of his retirement income if he has the bigger pension and separates (whenever this happens). In particular, I’d like to see products like single life annuities only being purchased with the partner’s documented assent.
Finally, there is the thorny issue of state pensions from which women consistently get short-changed. The state pension age increases that form the complaint of WASPI, were introduced because of a wide raft of equalisation measures that include GMP equalisation and the introduction of unisex annuities. The original five year difference between male and female retirement ages was deemed illegal under sex equality legislation, but it was there for the reason that women generally got a lower state pension due to incomplete national insurance histories.
Whatever the rights and wrongs of the WASPI argument, we have to make sure that women are more aware of their entitlements and better equipped to maximise their state pension through good management.
Steve Webb has been very good at advising women to continue to claim for child benefit even when they are means tested out of them, women need to be constantl8y vigilant that they are not needlessly missing out on state pension credits and that they are rewarded for the caring they do. Likewise, women need to be aware of their right to pension credit where they do not have substantial entitlements to private pensions and don’t have the full state pension.
These are things that women need to know about pensions, for they have far more control of income from their spouses and partners than they often think, and they are often more likely to get financial self-sufficiency from the state than from private pensions – which depend on earnings.
Ironically, for all the noise it makes about the pension gender equality gap, there is relatively little that the private pension sector can do to reduce it, this is an area that requires “girl power” and respectful partners.
Sigh. Decent pensions should not rely on “respectful partners”.
There’s the straight-forward practical point that not all carers have partners. And even if they do, we cannot, regretably, depend on them being respectful.
Everyone should be entitled to an adequate pension in their own right and, where private pensions cannot ensure this, then it’s the job of the State.