Baroness Drake outlines thinking on gender pensions gap
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The Pensions Commission is looking at how the pensions system can mitigate the pensions gender gap, even if some causes lie outside of pensions, Baroness Jeannie Drake has said. The peer also hinted at differences of view with the pensions minister on how to address the gap.
The gender pensions gap for women in their mid to late 50s was 48% in 2020-22, and 75% for those who only have defined contribution pensions, according to the government, while the Pensions Policy Institute has found that women have about two-thirds of the average income from private pensions, falling to 54% for single mothers.
The Pensions Commission’s interim report acknowledged that women, along with disabled people, ethnic minorities and the self-employed, are underpensioned. While women’s state pension entitlements are today nearly the same as men’s thanks to policy reforms, “efforts must now turn to the private pension savings gap that women face relative to men”, it said.
Speaking at the Pensions Management Institute’s annual conference on Wednesday, Baroness Drake said she and her two co-commissioners are considering what to do “around pension policy that would mitigate” the wide gap in private pensions between women and men, even if the drivers sit partly outside the pensions arena.
“At the moment it's sort of work in progress. I wouldn't want to jump. And also affordability at the moment is quite a challenge,” she said. “But I haven't given up yet. It's not an easy one because it involves private savings. It's not like the state where you can say, well, we can credit in a certain way.”
When asked whether pensions – which are individual, and do not come with automatic spousal provision in the defined contribution sector – should take greater account of households, she said doing so had pros and cons for women.
“I'm very much in the camp, women accrue their assets in their own right and their pension in their own right, because you have no idea of what life brings or what future household arrangements,” she said.
However, “on another level, household comes in, for example, if you look at lower paid women,” she admitted.
Lower paid women often live in households with overall income that would justify the lower earner saving for a pension, creating “a compelling case” that policy should not assume that low earning women cannot afford to save for later life, she said.
“We've been looking more and more at, one, this decision to give a tax credit so to speak,” she revealed.
“The other thing we've been looking at is how the universal credit system works,” the Labour peer said.
“The other thing we've been looking at is how the universal credit system works,” the Labour peer said.
Any benefit under universal credit is net of any pension contributions, so in many instances the payment would go up, she explained, giving the example of a single mother.
“There are times when household considerations justify slight difference in attitude to policy,” she said.
Bell: Labour market policies will have more effect
Baroness Drake hinted that she is yet to convince the pensions minister of her views on women’s pensions.
Speaking at the same event, Torsten Bell argued that current labour market policies “will probably have more effect” on closing the gender pensions gap than pension policies, pointing to a big increase in state expenditure on childcare.
However, he did not deny that pension design can play a role in closing the gap. “There's definitely things we can do there, how pensions operate,” he said.
Bell cited auto-enrolment as a policy that has brought more women into pensions, adding that there are “wider coverage questions about low earners” that the Pensions Commission will look at.
What changes could be made to the pensions system that would reduce the gender pensions gap?
