UK needs overhaul of 'intrinsically biased' pensions system

Barnett Waddingham policy and strategy lead, Amanda Latham, has called for an “overhaul” of the UK pensions system, arguing that it is “intrinsically biased towards men” after research from the group revealed that women are far more likely to be reliant on the state pension in retirement than men.

The survey revealed that 30 per cent of women do not have any private or workplace pensions, and will have only their state pension in retirement, which is almost double the amount of men (17 per cent) in the same position.

This gap widens even further in later life, with the survey revealing that 38 per cent of women over 55 will rely on the state pension only, compared to 17 per cent of men over 55.

Latham, warned that for many, a state pension alone is simply not enough to cover the costs of a comfortable retirement.

"Without the additional support of a private or workplace pension, people could face financial instability in later life or a total change in lifestyle," she stated.

However, the study showed that auto-enrolment is having more of an impact on younger workers, with 59 per cent of women aged 25-34 holding a workplace or occupational pension, compared to 58 per cent of men.

Despite this, it clarified that the pensions gender gap begins to diverge after age 35, revealing that by ages 45-54, 67 per cent of men hold a workplace pension compared to 53 per cent of women.

The firm said that this could indicate that auto-enrolment stops being as effective for women in mid-life, suggesting that this may perhaps be as a consequence of parental responsibilities leading to part-time or lower-paid work.

Latham commented: “The findings of our research are stark; women are twice as likely than men to be walking into retirement with insufficient funds.

“While auto-enrolment is getting more younger women on the path to retirement savings, women in mid- and later-life are more likely to be disadvantaged.

"For example, our previous study into the gender pensions gap found that women taking a career break to have children are more likely to fall behind and end up with less in their pension pot at retirement."

She continued: “To turn the dial and close the gender pensions gap, we need to be overhauling the UK pension system which is intrinsically biased towards men.

“Policymakers and employers need to think about how to introduce measures that will target women who are not topping up their pension at crucial stages of life – whether it be reviewing auto-enrolment rules, or encouraging employers to improve pay and benefits during and after a career break.

“It may not be enough to simply strive for equal treatment within the pensions system.

“Instead, we should be thinking about how to create a more fair, robust and inclusive framework that gives everybody the best chance at building financial security for retirement in a targeted way.”

Latham suggested that the government review auto-enrolment recommendations, stating that it is “clear” that the minimum threshold impacts more women than men and that action should be taken “sooner rather than later”.

She also recommended an increase in minimum level contribution “as soon as possible”, the removal of the upper age band for pensions auto-enrolment, and consideration of income from multiple jobs, if the lower earnings threshold is not removed.

Alongside these auto-enrolment reforms, Latham recommended a review of the state pension provision, a move to flat rate of pensions tax relief, and to allow couples to pay into each other’s pension plans.

She noted that the evidence base on inequality of employment outcomes by sexual orientation is weak and inconsistent, stressing that “what is measured is what matters when we look to create change”.

“To meaningfully develop a system that works for everyone, data needs to be collected and reported to understand progress and the impacts of policy changes,” she said, suggesting that more data be collected on those identifying as trans or non-binary.

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