Pensions provider Scottish Widows is calling for the minimum auto-enrolment earning threshold to be scrapped, as a way to improve women’s savings.
This is one of the company’s recommendations stemming from its Women and Retirement Report 2017, presented last night (2 November) in Westminster.
One of the main conclusions of this year’s research is that divorced women are missing out on £5bn in pension payments every single year.
Catherine Stewart, retirement expert at Scottish Widows, said that the research showed that 32 per cent of women who work part-time earn less than the £10,000 auto-enrolment threshold, and are “missing out on valuable employer contributions”.
“This is an unfair barrier,” she added.
The provider’s recommendation is to remove the minimum threshold altogether, and that auto-enrolment contributions should be based on full salary rather than band earnings.
The current auto-enrolment review, launched last year by the Department for Work & Pensions (DWP), is expected to publish a report in December.
Ms Stewart said this makes now the ideal time for the government to act.
Scottish Widows is also proposing that the minimum age to be enrolled in a workplace scheme should be brought down from the current 22 to 18-years-old.
Ms Stewart said: “This could give some women four extra years of saving to help mitigate future periods of part-time work later in life.
“A female earning the average salary for age 18 to 21 of £13,897 would save around £4,500 with the four extra years of saving auto-enrolment contributions of 8 per cent.
“Assuming growth of 2.5 per cent per year, after charges and inflation, this would be worth more than £14,000 by the age of 68.”
The provider is also calling for the inclusion of pensions in divorce proceedings to be compulsory.
According to Office for National Statistics data, 42 per cent of marriages end in divorce, and the Scottish Widows research showed that seven in 10 couples don’t consider pensions during divorce proceedings.
Ms Stewart said: “We’d like to see a government-led education campaign to address this issue and help men and women better understand the legalities.”
This should be done under the remit of the new single financial guidance body, she added.
This new guidance body, which will merge Pension Wise, The Pensions Advisory Service (Tpas) and The Money Advice Service, will be created under the new Financial Guidance and Claims Bill.
This new legislation is “an opportunity for us to encourage the inclusion of a module focusing on discussing pensions as part of divorce negotiations,” Ms Stewart said.
Lastly, but not least, Scottish Widows wants to maximise the workplace as a key channel for addressing the retirement savings gap.
Ms Stewart said: “We’re therefore launching our new employer guide which explains the saving challenges women are more likely to face, and details the information employees might need to know.”