PENSIONS
W hile women comprise around 74% of employees within the LGPS in England and Wales, they have lower mean pay and accrued pensions than men. Quite a headline, isn’t it? Thankfully, due to mandatory reporting (see https:// ow.ly/Wcik50Ttabe) we now have more data on the gap between what men and women are paid in local government, but how familiar are we with thinking about how that impacts the gap in what they receive from their LGPS when they retire? Assessing the data The gender pensions gap is an issue that the Scheme Advisory Board (SAB) (see https://ow.ly/qObh50Ttakw) for the LGPS in England and Wales has been investigating for some time. With more than 1.2 million local government workers saving for their future retirement by paying into the LGPS, the gender pensions gap is critical to the future wellbeing of a lot of people – people who spend their working lives doing really important work for our local communities. Absolutely! We know from LGA data (see https://ow.ly/E6Nj50Ttawp) that more women than men work in local government; therefore, it’s unsurprising that LGPS membership too is 74% female. So, if there is a gender pay gap it is almost certain that there will also be a gender pensions gap. This is because pay is one of the critical factors used to work out the pension paid to a local government employee when they retire. But is there anything more to learn from looking at the gender pensions gap? The gender pay gap is only ever a snapshot in time while the pensions data shows you how pay changes over someone’s career history, and how disadvantage changes over time. To date, the SAB has commissioned two reports from the Government Actuary’s Department (GAD) to assess how much current pensioners are receiving. More importantly, they will look at the pension pot that those working now are building up. Further exploration We can’t do much about the pensions already in payment (where the average woman’s pension is only half a man’s), but the initial report from GAD (see https://ow.ly/oHYM50TtaIM) identified
a substantial difference between the average LGPS pension benefits currently being built up by male and female scheme members. The difference is 34.7% for benefits in the reformed Career Average Revalued Earnings (CARE) scheme – which has been in place since 2014 – and 46.4% for benefits in the legacy final salary scheme. “The gender pay gap is only ever a snapshot in time while the pensions data shows you how pay changes over someone’s career history, and how disadvantage changes over time” This does show promising signs that the gap has reduced over time, particularly with the introduction of the career average scheme, and potentially indicates some progress towards equality. But we can see the gap is still opening up between men and women for existing staff in their 30s and 40s – perhaps unsurprisingly the decades in which most people (but mainly women) take time away from work for childcare and other caring responsibilities. That will mean this pattern will repeat for decades to come – unless we do something about it now. So, we asked GAD to explore these gender gaps in more depth in a second report (see https://ow.ly/HeBG50Ttqlk) that focussed on: l career patterns – in particular, part-time working l differences relating to employers or categories of employers that participate in the LGPS, such as local authorities and schools l comparing the analysis with the LGA’s 2019 gender pay gap report (see https:// ow.ly/urUj50Ttqpa). As you’d expect, there wasn’t a simple answer. That’s because there is a complex interaction between the types of work women do, their career patterns and the opportunity to progress their career after having taken on childcare, undertaking other caring responsibilities or taking time
out to deal with the impact of life events. The second report showed, for example, that part-time working patterns are closely related to gender pension (and pay) gaps for LGPS members – but they don’t explain the whole picture. Improving outcomes for women Research by the Women’s Budget Group (see https://ow.ly/VSjl50TtquJ) revealed a jaw-dropping 73.5% gap in private pension wealth between women and men, and the Pensions Policy Institute (see https:// ow.ly/mriV50TtqBc) found that overall wealth inequality in later life is reduced because women are more likely to work in the public sector and still have access to a valuable defined benefit pension scheme (like the LGPS). So public sector pensions can be part of the solution. We know that many local government employers are committed to and can have a crucial role in improving outcomes for women. We believe that better alignment of gender pay and pension gap reporting would allow for greater transparency and a better understanding of both issues and – hopefully – consequently a further narrowing of the gap. Also key to this is improving how LGPS funds and employers communicate with scheme members / their employees to ensure they understand the potential pension implications of career choices and manage their pension during life events which contribute to the gender pension gap. The important roles that human resources and payroll teams have in assisting employees to understand their pension outcomes cannot be understated. n Links corner Further resources to find out more about the SAB’s work on the gender pensions gap can be found here: l SAB website: https://ow.ly/ PgoJ50TtqMm l letter from the SAB to HM Treasury calling for gender pensions gap analysis to be mainstreamed across public sector pensions: https://ow.ly/ iT8M50TtqSz l letter from SAB to the Ministry of Housing, Communities and Local Government recommending some changes to how unpaid, authorised leave is treated to reduce the disadvantage to women members: https://ow.ly/6Gfu50TtqVt.
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| Professional in Payroll, Pensions and Reward |
Issue 105 | November 2024
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