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Fiona Tait: We must accept men and women can never be equal in pensions 

We need policies that admit the differences and address them, rather than simply trying to make everything equal

To paraphrase George Orwell, all people are equal, but some are more equal than others. This month sees the parliamentary debate on the rise in the state pension age for 1950s women, and a report from the Pensions Policy Institute on ways of tackling the pensions gender gap.

The new state pension tries to make things equal between men and women. Henceforth, each will have their own state pension entitlement, accrued in the same way and paid from the same state pension age.

It is all the more ironic then that one of the grounds for complaint about the recent rise in the state pension age for 1950s women is that it is discriminatory.
The fact is, it was discriminatory before the change and most women, albeit not those in this particular cohort, will get a better state pension under the new rules.

To be fair, many of the Women Against State Pension Inequality members do not dispute this.

Their issue is not the change but the timescale and lack of communication that did not allow them time to prepare.

In contrast, the PPI report does not look for equality of treatment but for ways of providing equality in the end result, acknowledging that women’s working patterns are different and likely to remain so. The simple truth is that women tend to have lower pensions than men because they are likely to earn less, and the main reason they earn less is because they are more likely to take a career break. This difference is often referred to as the “motherhood penalty”.

LEBC: 1950s-born women are subsidising next generations

Taking time out affects ongoing earnings capability, something demonstrated by the fact both average earnings and pension contributions are slightly higher for women in comparison with men below the age of 35, after which the pattern reverses and the gap becomes much wider.

Research by the Wellbeing, Health, Retirement and Lifecourse project shows a career break does not just have an impact on income during the time off. In most cases, earnings never return to the level they were at before. Many returners choose to work fewer hours and this typically means they are also placed in less senior roles.

This pattern does not suit the traditional approach to pension planning, which is generally based on long-term and persistent employment.

There is less expectation that this will be with a single employer, but starting early and saving regularly is the usual advice.

A career break can deliver a fatal blow to this strategy. Indeed, the PPI research shows that only 34 per cent of women are likely to replicate their pre-retirement income at state pension age after taking a five-year break, as opposed to 49 per cent of those working continuously.

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An obvious approach, but one which does not seem to have gained much traction to date, is to make use of the fact career breaks are usually triggered by significant life events, which could be targeted as “teachable moments”.

Research shows people respond more to information that is relevant to their particular circumstances, and pre-maternity workshops could be used to inform expectant parents and direct them to appropriate guidance.

The PPI report also suggests more flexible investment options, which would allow leavers to alter their risk profile when they are not working, as well as making it easier to consolidate pensions from broken periods of service with different employers.

Some of this will be challenging to deliver but we do need to work on it as an industry.

While we must always do our best to be fair, we can never be truly equal.

What we need are policies that admit the differences and address them, rather than those that simply try to make everything equal, even in very unequal situations.

Fiona Tait is technical director at Intelligent Pensions

You can follow her on Twitter @PensionsGirlie


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Duncan Gafney 2nd July 2019 at 1:26 pm

    I am amazed, someone talking honest sense. Thank you Fiona.

  2. Andy Schleider 2nd July 2019 at 4:23 pm

    Another reason why women tended to have lower incomes (all other things being equal) before gender equalisation is because they have been proven to statistically live longer than men. Then equalisation came along and now men get lower incomes as well!

  3. Oh Fiona! Stand as a candidate!

    At last! Less of the PC drivel and common sense. Men and women are not equal. That doesn’t mean women are any less or men are any more. Just different.

  4. Good article Fiona ..

    I do, however think the state pension is not a great argument ?
    The state pension after all, is just a giant “Ponzi” scheme, and will fail/discriminate everyone (in time).

    Pensions in general-:
    Removal (some years back) of the need to have earned income before you could have a pension was a real plus for females / home makers, I would always advise, instead of the main bread winner topping up their own pension this contribution should be diverted to the home maker…. most of the time this was agreed, however you cant account for the odd misogynist here and there….
    Again in the work place any top up to the main wage earner pension may well be best served redirected to the one with the lower salary …

    You have to explain the benefits of estate equalisation.

  5. Entirely agree with this article. The only thing it doesn’t mention is the “fatherhood penalty”. The real issue is life choices. If anyone wants to have a bigger pension pot, don’t have kids, spend less on holidays, live in a cheaper house with a smaller mortgage, don’t renew your car every 3 years. Or, do all of those things and have a smaller pension.

  6. Christopher Petrie 8th July 2019 at 4:10 pm

    The thing is, we don’t seem to be in a gender-equality era any longer. We’re moving towards gender-neutrality.

    I fully expect many official forms to stop asking the gender of people, within the next 5 years. Transact already have a 3rd box (do not wish to state) on their application forms. The Scottish government wants to remove that question on their census forms.

    No doubt there will be a court case over the issue of requiring people to state their gender in the future.

    With the movement towards self-identifying now in full swing, these issues will only get more complex.

    I’m just glad I don’t have to be the one to sort it all out!

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