This guest blog comes from our friends at Insurance Ireland for Pensions Awareness Week 2022.

According to an ESRI report from September 2019, Ireland has a gender pensions gap of 35%. This means that in retirement, women will earn 35% less than male counterparts. A retired man in Ireland will receive on average €150 a week more than a retired woman.  This was primarily found to relate to the fact that women are less likely to receive a private or occupational pension. There is a risk this will be further exacerbated by the Covid-19 crisis as women are more likely to be primarily responsible for caring for children and this would impact on their ability to work during the school and creche closures for example. Numerous reports over the course of the pandemic provided evidence that this has indeed been the case.

So, what needs to be done to support women in building a sufficient pension for their retirement? Many argue that the root cause is not in pension policy, but in social issues – such as affordable childcare, the Gender Pay Gap and maternity/parental leave. Indeed, in many respects Sweden is the gold standard for equality issues, and it is in the top three countries in Europe for gender pensions equality. The reasons for this primarily relate to these social issues including shared parental leave by both parents; pensions premiums are paid during parental and sick leave and child-care costs which are a fraction of those in Ireland, meaning that cashflow is available to save into a pension. However even in the absence of action on these issues, there is still much that can be done by both legislators and the pensions industry to be mindful of, and work to mitigate, the Gender Pensions Gap.

Awareness of different accumulation options is certainly needed – the area of pensions is not easily understandable and the rules regarding how pension statements/disclosure of pension products are to be set out mean that most communications is based on actuarial calculations and tables. Insurance Ireland members have taken steps to try to remove some of the jargon around pensions but if the underlying legislative disclosure requirements remain so complex, the value is limited. Our view is that legislative changes are needed to the disclosure requirements such as those set out in the Pensions Act.

Similarly, awareness of options such as Pensions Adjustment Orders (PAO) for divorcing couples needs to be much higher. While the family home tends to be the largest financial asset in a marriage/divorce, for many couples the pension can be the second largest. In the 2019 ESRI report, the impact on women’s pension entitlement as a stay-at-home parent was noted. For couples who make a joint decision that a mother will take the role of the stay-at-home parent and subsequently divorce, the expectation of reliance on the joint pension income is removed and the mother has lost vital contributions to her pension. However, there is an existing mechanism to implement sharing of the pension entitlement, so that both parties will have some level of pension in retirement.

Also, increased awareness of Additional Voluntary Contributions (AVCs) where individuals can make payments in addition to their normal contributions to an occupational pension scheme to increase retirement benefits will be helpful. Depending on income, this can be done during maternity/carer leave or indeed during probationary periods, during which employer contributions may not be made. And of course, Personal Retirement Savings Accounts (PRSAs) which is a personal pension arrangement. These are not linked to earnings and normally, an employer cannot make contributions to this pension without an associated tax cost.

But financial awareness is not the only way to try to address the Gender Pensions Gap. It is vital that Ireland’s public policy decisions are impact assessed to understand any potential unintended consequences for the Gender Pensions Gap. For example, auto-enrolment into pensions is coming. This means that employers will be required to provide access to a workplace pension and automatically enroll their employees into this scheme, subject to certain age and earnings thresholds. One of these earnings thresholds dictate that the auto-enrolment will apply only for those who are earning €20,000 or more. Many women who are in part-time or low income/unpaid carer roles will be automatically excluded from this initiative. Other countries who have introduced Auto-enrolment, such as Australia, have sought to address this inequality by having a much lower earnings threshold or indeed, removing an earnings threshold entirely. Some, such as New Zealand, provides an upfront kickstart bonus which helped to build the early years balance in their accounts. Options such as these need to be considered in any auto-enrolment system and Insurance Ireland published research on this in September 2020 as part of our ‘Universal Pension for Ireland’ series.

So, what can the industry do? Here at Insurance Ireland, we have established a dedicated working group to investigate potential options to support women in saving for their retirement. The group includes pension providers such as Zurich Life and Pensions, KBC Pensions and Irish Life. Options being discussed include feasibility of products such as a ‘couple’s pension’ whereby the pension would be jointly owned by the couple, and both could contribute and also use the accumulated fund for income in retirement. Currently, this is not permitted under Revenue rules and again, legislative change would be needed to accommodate this option. Other workstreams investigate how gender issues are considered by pension providers when designing new products and services and the timing and content of communications that are issued to policyholders.

There are no quick fixes for this issue, but it is important that it is part of the wider debate on pension simplification and reform and that it remains high on the agenda for legislators, regulators, providers and consumers.

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