Women in OECD countries receive around a quarter less income than men from the pension system.
According to the organisation’s research into gender pensions gaps in member countries, women over 65 take 26% less retirement income than their male counterparts.
Its report echoes findings by pensions company Scottish Widows earlier this week that younger women could save £100,000 less into their pension than men over the course of their careers.
The OECD found that the gap originated for a number of reasons, including lower participation in retirement savings plans between the ages of 25 and 44, and breaks in employment for parenting.
It also found that the design of retirement savings plans played a role in savings gaps. Eligibility rules meant that in certain workplaces there could be differences in pension plan coverage, for example.
It highlighted several ways in which the design of pension plans was not gender neutral and could therefore lead women to save less.
- Eligibility criteria based on working hours or earnings;
- Contributions or right accruals stopping during periods of maternity and parental leave;
- An emphasis on conservative investment strategies;
- Pension rights and assets not split automatically between ex-spouses on separation;
- Retirement benefits are not indexed; and
- Pay-out options with survivor benefits not being available.
Its research also revealed evidence of behavioural biases that could lead women to save less than men. It recommended that providers and employers carry out more research to understand women’s preferences and behaviours around saving.
The OECD made a number of policy recommendations that could help policy-makers, providers and employers address the gap. These are:
- Promote women’s access to retirement saving (for example in industries predominantly employing women);
- Encouraging women to save through financial incentives or financial education initiatives tailored especially to them;
- Improve how much women save and how often, through financial education and targeted communication;
- Adapt retirement savings arrangements so they fit around women’s career patterns, for example more flexibility on contributions or adapting fee structures;
- Improve investment returns by offering options for less conservative investment plans and offering objective assessments to inform investment decisions;
- Increase benefit entitlements by extending rights to spouses, facilitating the split of funds upon divorce, and increasing awareness of these rights; and
- Equalise retirement ages between genders and promote pay-out options with survivor benefits.
Amanda Latham, policy and strategy lead at consultancy firm Barnett Waddingham, said that the pandemic had worsened financial inequality for women.
She said: “As we start to ‘build back better’, women’s financial futures must be a core part of our agenda. The OECD’s findings are clear; biases in the private pension system have created a stark disparity in wealth between men and women at retirement.
“It is far too easy to put the burden on women to contribute more – it’s vital that the government and industry work to create a more robust and inclusive pensions framework, offering fairer solutions to all.”
She said that employers should set higher default contribution levels for pensions auto-enrolment, improve pay and benefits during and after career breaks, and address the gender pay gap.
“At a policy level, we must consider whether the auto-enrolment rules are fit for purpose, review the state pension provision and introduce more beneficial policies for those taking time out from the workplace to look after children and the elderly,” she added.
“All of this analysis should also consider intersectional identities – people who are gender non-conforming, people of colour, and people with disabilities are all likely to have differing financial needs. A ‘one size fits all’ policy will simply fail all – we must choose to challenge the system and improve it for everyone.”