PensionsFeb 18 2020

Pay disparity could keep pension gap open until 2100

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Pay disparity could keep pension gap open until 2100

Pensions for women in the UK will remain far lower in value than men's unless pay parity and education are tackled head-on, the chief executive of the Chartered Insurance Institute has warned.

Sian Fisher, who in 2019 co-authored the Insuring Women's Futures Manifesto, said although it would take time for women to take more control over their financial futures, the conversations needed to happen now to help women avoid a financially insecure retirement.

Ms Fisher said: "Things will take time. After all, human beings have only been on this planet for a million years and that's only a nanosecond in the whole history of the earth. In that time, women have only existed as legal persons since the middle of the last century, so things do take time. 

"We have had equal pay legislation for nearly 50 years and, I would imagine, if we had done the report 50 years ago it would have been even worse."

But, she warned, the gender pay report has been showing a persistent gap between the earnings power of men and women with the same experience, doing the same job. "And it is not moving. The current estimates are that if the pay levels stay as they are, then it will be 2050 by the time there is a closing of that pay gap.

"And, if you extrapolate from that, pension parity might not be there until 2100, and none of us think that is the right place to be."

Quite aside from the moral issues of 'fairness', she pointed to the fact this would mean a higher cost to society in terms of a greater dependency on the state pension.

In fact, the state pension has already been a bone of contention among women especially since the rising of the state pension age. 

Steven Cameron, pensions director at Aegon, said the state pension should mirror the flexibility awarded to private pensions, citing in particular the "plight of the Waspi women" (those covered by the Women Against State Pension Inequality campaign), who have suffered "hardship caused by having to wait longer for the state pension to kick in".

If workplace pension values for women are still so far below those for men, the industry needs to do more to help those women approaching and already in retirement.

The current estimates are that if the pay levels stay as they are, then it will be 2050 by the time there is a closing of that pay gap. Sian Fisher

Ms Fisher said the work the CII and its members were doing to help turn this around was a vital step in the right direction, adding: "So if we can turn this from a liability to a positive, we can be proud of having lived through these changes and made a positive contribution."

Keith Richards, chief executive of the Personal Finance Society, agreed that education and conversations about finance were a great place to start for helping to bridge these gaps. 

However, he said things may have started to take a turn for the worse 30 years ago, when the days of the 'Man from the Pru' ended. 

He explained: "In the days of the Man from the Pru, the financial interaction would have been with the woman of the household, rather than the husband.

"Also, the children would have seen some financial interactions between their parents - usually the mother - and a professional, such as someone selling life insurance.

"We do not have that so much these days, so the new generation will not have seen their parents interacting around their financial wellbeing, so finance does not become a natural thing for them to do later on in life."

To help combat this trend, last year, the PFS launched the My Personal Finance Skills programme, and to date, more than 800 financial planners have already signed up to be ambassadors.

Mr Richards said by the end of January, more than 600 events have been planned in schools around the country for 16 to 18 year olds. "This is totally inclusive, and it is the first time that an educational awareness programme has sought to use gamification to engage young people in their financial wellbeing."

He told FTAdviser this programme would not only help by giving young people a positive encounter with a financial adviser, which might help them understand and seek out professional financial advice later in life, but also might bring new blood into the industry. 

"Even if it doesn't have an impact now, it means later in life they will be able to reflect on their encounter with a financial adviser. Moreover, we have already seen positive interest from young people about a potential career in financial planning", he said.

So while some things have not moved forward very quickly, there are positives. Mr Richards added: "In our last graduation ceremony last year, more than 30 per cent were women graduates under the age of 30 and most had gone into financial planning as their career of choice. 

"Change of this sort is like an oil tanker though - the wheel has turned and it is starting to change course. But we keep pressing on", he added, "because it is important for all of us."

simoney.kyriakou@ft.com

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