PPI Pensions Policy Institute Closing the Gender Pensions Gap - - PowerPoint PPT Presentation

Daniela Silcock

Central Hall, Westminster 4th November 2019 Modelling sponsored by Now: Pensions

www.pensionspolicyinstitute.org.uk @PPI_Research

PPI

Pensions Policy Institute

Closing the Gender Pensions Gap

The two policies help smooth contribution levels during working life

PPI

Pensions Policy Institute

The projected pension contributions of women currently aged 22 under a typical life course (2019 earnings terms)1

1 PPI modelling

22 27 32 37 42 47 52 57 62 67 £0 £500 £1,000 £1,500 £2,000 £2,500

Age

Contributions Family-carer top-up Employer Employee

Full-time Works full-time Returns part-time Takes time off for caring

2025: Introduction of the removal of lower band earnings

The two policies combined could make up around two thirds of the difference between working full time and taking time out for caring

PPI

Pensions Policy Institute

The projected pension savings of women currently aged 22 under a typical life course (2019 earnings terms)1

£41,000 £64,000 £87,800 £115,400 £- £20,000 £40,000 £60,000 £80,000 £100,000 £120,000 £140,000 22 27 32 37 42 47 52 57 62 67

Pension fund value

Age

Current policy Family carer top-up Family carer top-up and contributions from the first pound Full time under Family carer top-up and contributions from the first pound

Full-time Works full-time Returns part-time Takes time off for caring

2025: Introduction of the removal of lower band earnings

1 PPI modelling

The policies reduce the differences between men and women but do not fully compensate for time out or the gender pay gap

PPI

Pensions Policy Institute

1 PPI modelling

Projected AE pension pot at retirement (2019 earnings terms) with a family carer top-up and contributions from the first pound1

88,900 87,000 70,200 52,200 31,800 38,900

• 1,100
• 10,300

17,500 19,400 18,500 18,500 18,500 18,500 18,500 18,500

£0 £20,000 £40,000 £60,000 £80,000 £100,000 £120,000

Full time Takes one year break at age 26 as a family carer, returns to work full time Full time Takes a 10 year break at age 25 as a family carer, returns to work full time Takes a 16 year break at age 26 as a family carer, returns part-time until age 50 then full-time to Spa Takes a 10 year break at age 25 as family carer, returns full time. Exits labour market at age 55 to care for family Male Female

Pension pot value

Life courses

Family carer top-up + Contributions from the first pound Family carer top-up Current policy

The two policies could reduce the gap by around 50%

PPI

Pensions Policy Institute

1 PPI modelling

Proportion of gender gap attributable to different factors and extent to which policies reduce the gap1

100 50 73 45 28 22 1 7 14 2

• 20

40 60 80 100

Male pension wealth Differing working patterns Gender pay gap Participation rates Scheme type Tendancy to retire early Womens pension wealth Family carer top-up Contributions from the first pound Women - All policies

Index

Second order effect

The two policies address both working pattern differences and the pay gap

PPI

Pensions Policy Institute

1 PPI modelling

Proportion of gender gap attributable to different factors and extent to which policies reduce the gap1

100 50 45 28 22 1

• 20

40 60 80 100

Male pension wealth (Current policy) Differing working patterns Gender pay gap Participation rates Scheme type Tendancy to retire early Womens pension wealth (Current policy)

Index

PPI

Pensions Policy Institute

1 PPI modelling

Proportion of gender gap attributable to different factors and extent to which policies reduce the gap1

100 57 41 25 22 1

• 20

40 60 80 100

Male pension wealth (Current policy) Differing working patterns Gender pay gap Participation rates Scheme type Tendancy to retire early Womens pension wealth

4 3 Index

The two policies address both working pattern differences and the pay gap

PPI

Pensions Policy Institute

1 PPI modelling

Proportion of gender gap attributable to different factors and extent to which policies reduce the gap1

100 73 31 19 22 1

• 20

40 60 80 100

Male pension wealth (Current policy) Differing working patterns Gender pay gap Participation rates Scheme type Tendancy to retire early Womens pension wealth

3 4 10 Index

The two policies address both working pattern differences and the pay gap

6

The two policies combines would cost an extra £6.1 billion per year

PPI

Pensions Policy Institute

£6,310 £22,030 £37,200

£0 £5,000 £10,000 £15,000 £20,000 £25,000 £30,000 £35,000 £40,000 £45,000

Cost (m)

Current policy Family carer top-up Contributions from the first pound Contributions from the first pound (additional tax relief)

+£0.9bn +£1.2bn +£0.3bn +£0.9bn +£2.7bn

Extra costs arising from policies to Government, employers and employees, aggregate (2019 earnings terms)1

1 WAS Wave 5, ONS MQ5 Table 4.3 Self-administered pension funds’ income and expenditure, ONS PEN2 Personal

Pensions (including stakeholder pensions): Scheme members’ annual contributions and DWP analysis

PPI

Pensions Policy Institute

Thank you for listening

Any questions?