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19 Jun 2017

Greater flexibility could help tackle gender pension gap

It´s time for employers to address the difference in pension savings of men and women, according to a new white paper from human resources consulting firm Mercer.

The Gender Pension Gap — From Awareness to Action says that businesses have a key role to play in ensuring their female employees do not retire into poverty.

Across the European Union, the gender pay gap has narrowed to 16% but the average gender pension gap is as high as 40%.

Commenting on the white paper, Mercer said that employers often recognise the responsibility they have, as primary income providers, to ensure that their employees are financially secure throughout their working lives and into retirement. However, the significant long-term effect of the difference between pension savings of men and women is still underestimated.

“Not only an urgent challenge for governments and policy makers, the pensions gap should also be front of employers´ minds,” said Mandy Schreuder, Diversity and Inclusion (D&I) consultant at Mercer. “Women live longer, but with lower levels of savings they face a higher risk of retiring into poverty than their male counterparts. The gender pay gap may be a hot topic at the moment, but few of us consider the impact it has, in combination with career breaks, on the financial wellness of women in retirement. Coupled with an ageing Europe workforce this challenge will be highly relevant to companies over the coming years.

“Companies that acknowledge and work to close this gap could reap the benefits of increased employee engagement and productivity. Working to improve the financial position of its female workforce is not only key to protecting business productivity and improving female talent attraction and retention, it is also the right thing to do.”

Mercer highlighted the lack of flexibility in most current pensions systems, with those earning less, working part-time or taking career breaks to care for children or older family members, accruing less pension.

Although some company plans try to bridge this gap, research conducted by Mercer found that less than 10% of organisations offer retirement or savings programmes customised to different working patterns.

Eve Read, principal, head of Proposition, DC & Financial Wellness at Mercer, explained: “Most retirement plans are designed for a 40-year long, continuous, full-time career with few breaks, and do not reflect womens´ divergent needs. Companies should review their benefits plans and communications through a gender lens to ensure they address the specific issues and needs of the female workforce.”

Another factor is that women tend to display less confidence when making financial decisions and are more cautious about taking risks than men. For example, data from Mercer´s Master Trust reveals women to be 62% more likely than men to invest in a defensive fund which has a lower expected level of growth. While risk aversion can lead to lower volatility in the pension saved, it can also reduce the final outcome significantly.

“The root causes behind women´s risk aversion and lack of financial confidence are multidimensional and complex but action-orientated financial education should be at the heart of the solution,” Read added. “We have found that benefits communication that is based on a woman´s individual circumstances is more likely to get her attention and to subsequently take positive action. Personalising the message and using language that is more engaging for women could help them make investment decisions that produce higher long-term returns that are more aligned with their needs and ambitions.”

Copyright © M2 Bespoke 2017

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