Pensions designed by men for men: TUC Pensions Conference
If you mingled among the delegates at the TUC Pensions Conference last week, then you would be sure to hear people chatting about one of the presentations: the barnstorming contribution of Baroness Hollis on women and pensions.
The Labour peer gave a robust denunciation of how the pensions system works for women.
“Pensions were designed by men, for men with 40 year jobs and 40 year marriages. As long as he held on to his work and she held on to him, women were deemed secure…
“Yet, with half of marriages ending in divorce, she can’t count on him; with caring responsibilities and a flexible labour market, she can’t count on the employer; and with derived rights to a state pension lost, she can’t count on the state except through her own National Insurance.”
This is a story of some progress made: measures in the 1990s to include pensions in divorce settlements among them; and a new State Pension which, although it creates a number of losers glossed over by the Coalition government that created it, is expected to benefit two-thirds of women.
And there is, of course, the introduction of automatic enrolment from 2012 to bring low earners into the pensions system.
But Hollis maintains that the pensions system still doesn’t work for women.
“Start contributing young – but women have children in their late 20s.
“Contribute enough – but women are part-time, low paid, sometimes in several small jobs, deemed casual by the employer.
“Contribute continuously – women can’t. Contributions start, stop with children, start again, stop with elder care.
“And then don’t touch it. Yet many women will face debt, disability or divorce in their 40s, and can’t access it. They have no other savings. And no access until they’re 55. Why?
“You couldn’t design a worse fit for women if you tried.”
Hollis’s analysis chimes with the TUC’s own research. In research published last summer we found that of the 26.4 million employees in the UK, 4.6 million (or 17.6 per cent) earn less than the £10,000 trigger level to be enrolled into a workplace pension. Of these, 3.4 million (around three quarters of the total number of workers earning less than the trigger level) are women. Indeed, more than a quarter of female employees earn less than the auto-enrolment trigger. The problem is particularly acute for part-time workers.
More than half – 56.8 per cent – of part-time workers earn less than £10,000. Their number includes more than three million female part-time employees compared to fewer than one million men.
It is tempting to put some of these issues into boxes labelled “old news”. What about the steady rise in female employment over the last 40 years? The increased number of men taking time out of work to do caring? Or the growing number of women on company boards?
Well, some of this is largely illusory: take-up of shared parental leave is minimal, whether due to lack of financial support or entrenched gender roles. Others, such as the position of women on company boards, are largely irrelevant to the situation of most low and middle income workers.
And women with children continue to face a pay penalty as well as pressure on their disposable incomes, including the widespread assumption that childcare expenses are paid from her wage packet. This money is therefore not available for her own needs, such as pension contributions.
It is not good enough to wait for society to iron out its inequalities before looking at retirement provision.
Hollis has a number of suggestions:
- Cutting the earnings trigger and allowing part-time jobs to be added together to bring more low earners into automatic enrolment.
- Increase contribution rates. Hollis says 10 per cent (with employer contributions from the first pound of earnings) but much evidence suggests it should be more.
- Protect the State Pension triple lock. For lower-paid women this will be their main, even small income.
Hollis’s final suggestion is one I am less comfortable with. She wants to blend rainy-day and retirement savings by allowing people to dip into the tax-free cash element of a pension. I worry that this would be a mistake. Would the money once spent ever be repaid? And wouldn’t the risk be that the woman’s pension would be seen as the best bet to cover short-term household shortfalls?
We have yet to hear the detail of the focus of the government’s review of automatic enrolment taking place this year. Or indeed whether the review will be structured in such a way that gives workers, including women, a proper voice in its proceedings. But it is a valuable opportunity to start redesigning our pensions system so that finally it works for women as well as men.