An embarrassment of pension gaps
By David Sells on Friday, 17 November 2023
My favourite collective noun, (thanks for asking), is that for pandas – an embarrassment. It should be the one we adopt for gaps too, particularly when we’re talking about pensions. It’s wonderfully apt.
Pension gaps are about inequality of retirement outcomes – and there are a lot of them.
Some quick stats.
The gender pensions gap is estimated to be more than twice the size of the gender pay gap, while women’s retirement wealth averages only one-third of men’s in the UK [NOW:Pensions].
Over a quarter of people aged 55+ (28%) currently have no pension provision from a workplace or private pension scheme, and will only receive a state pension [Barnett Waddingham].
There is also still a massive 40.3% difference between the pension savings of men and women [Fidelity’s Women and Money research]. Then, beyond the more publicised gender gap, only 25% of ethnic minorities had a private or workplace pension, compared to 38% of the general population - among black people, only 23% have a pension [Social Market Foundation].
And while one fifth (22%) of UK adults are currently living with a disability, this cohort on average has a pension wealth that is around a third (36%) of the typical UK pension pot [Pensions Policy Institute].
Truly an embarrassment of gaps.
Worky, the pension monster, has been out of work since his starring but ill-fated role in the Government’s 2016 pension campaign.
Part of this is undoubtedly down to a lack of understanding.
For example, one in four 18–24-year-olds with a workplace pension think that their contributions end up in a bank account, according to research by Royal London. It’s also been highlighted by Barnett Waddingham that one in ten women (10%) don’t even know whether they have a pension, and a further 4% believe they have a pension but aren’t sure which type.
It is important to note there have also been some wins in the quest to ease inequality and there continues to be real movement in the right direction.
The impact of auto-enrolment has also had a monumental impact since it was introduced in 2012. And with the bill having now received royal ascent, 600,000 18 to 21-year-olds working in the private sector are set to benefit.
But the problem with trying to solve all of this is that is that there’s no magic bullet. Like equality gaps more broadly, the solutions are unwieldy, complex, and require a joint effort from an often-disparate group.
The closest that we can come to is ‘awareness’ and or ‘engagement’. The hope that by getting people a bit more involved in their later life planning, they might manage to avoid some of the pitfalls that litter the pathway.
These campaigns are often big and bold.
The 2022 Big Zuu-led ‘Pension Attention’ campaign gained plaudits from across in industry, and this year saw Timmy Mallett lean on 90’s nostalgia to prompt older millennials to think about how they’re saving for their future.
The race is on to empower people to make changes to their saving patterns now, and there is a real impetus for financial services firms to think bigger, bolder, and braver. We must be willing to confront problems we don’t necessarily have solutions to – identifying a particular area like disability and committing time, money, and resources to bring people together with the explicit aim of delivering meaningful change.
Crucially, for every pound that is successfully squirrelled away for retirement now, a multiple of that benefit is felt further down the line by consumers, FS firms, and Government alike. It’s more than worth it.
What’s painfully clear is that the effort to tackle pension inequality and the embarrassment of pension gaps can’t ease. The challenge is how to tackle the problem afresh each time.
Maybe it’s time for a pension panda...