Progress being made on closing the gender pension gap in Ireland

The Gender Pension Gap in Ireland is Closing – but it is not closed yet

Why should women in Ireland get less in their pension than men? That’s a question that has occupied both actuaries and gender equality campaigners for years.

In 2018, women in the EU aged over 65 received a pension that was 30% less than men. In Ireland the gender pension gap has been falling. EU stats show a general pensions gap of 28% here in 2018.

A recent report by Irish Life into the gender pension gap found that women in Ireland could have a pension gap that was 22% less than men among its client pension schemes.

While both figures are less than the EU average, having 28% or even 22% less to live on in retirement is far from ideal. Even at the lower figure of 22%, it translates into a pension pot of €120,000 less.

The impact of gender pension gap in Ireland

That shortfall is especially concerning for Irish women. Firstly, Irish women live to 83, five years more than males, according to the CSO. This means their pension pots should be roughly a quarter bigger - not a quarter smaller! - than those of men.

Secondly, Irish pensions aren’t that big to begin with so women are getting a smaller chunk of a smallish pie.

With a low level of pension coverage, Irish pensioners are more likely to be at risk of ‘pension poverty’ than the EU average. One in seven people over 65 in the EU are at risk of poverty. In Ireland, the figure is one in five, and for women, it is higher still.

So why do women get a much lower pension than men? It’s certainly not because they are less likely to join or contribute to their company pensions. When a pension is made available, women are more likely to take one out than men.

Teresa Kelly Oroz, Head of Public Policy & Governance, Irish Life, says: “There are fundamentally two key issues which impact women’s pensions. Firstly the gender salary gap, secondly taking unpaid leave to look after children or other caring responsibilities. Taking unpaid leave early in your career can have a devastating impact on your pension and while families will often work out the impact of being without a salary for a period of time they often forget the secondary impact to their pensions. As women also tend to live longer, they are left in the insidious situation that they have a smaller pension pot that needs to support them for longer.”

Salary contributions and Additional Voluntary Contributions (AVCs) are also roughly even among men and women. However, while salary percentages are similar, contributions in actual money are much higher for men -simply because they earn more over their career and on average they work for longer.

That divergence begins in the mid to late twenties, reaches its peak when men and women are in their early fifties, lessening but never closing afterwards, in the run up to retirement. Pre-retirement, men earn nearly €20,000 more than women a pay gap that makes a massive difference to your final pension according to a recent report by Irish Life.

However, the disparity is smaller across other age segments, according to the Irish Life report. This suggests that it may be a legacy issue and that the women of Generation X (born 1961- 1981) will feel the difference more explicitly. Women born after the early-1980s are unlikely to be impacted as much.

Apart from the pay differential, women’s pensions take another major hit when they take time out to look after children. Recent CSO data shows that 445,500 women identified as home carers, while only 9,200 men fill this role  Overall, Irish men spend seven more years in paid employment than women.

What can we do about Ireland’s gender pension gap?

So, what can be done? The recent Irish Life report on the gender pension gap and Teresa Kelly Oroz, Head of Public Policy & Governance, Irish Life has some key suggestions:

  • Review gender salary parity, current promotion processes and leave policies.
  • Services could be offered to help those on leave make informed decisions to reduce the impact of unpaid leave on their pension or facilitating contributions during unpaid leave.
  • Governments could introduce specific tax measures. For example, limits on contributions could be increased for people when their pension is paused due to unpaid maternity, parental or adoption leave.
  • We could also allow for tax efficient pension contributions to a partner’s fund while they are on leave.
  • Future pension reform also needs to be gender-proofed to avoid embedding policies which could perpetuate gender inequalities. In particular, the new auto-enrolment scheme needs to carefully consider the implications for women when putting together the design. The higher the salary for auto-enrolment, the more women who will be disenfranchised. Secondly, as women are likely to have multiple jobs a simple mechanism needs to be put in place to ensure these are tracked and hence allow access to auto-enrolment. Finally, careful consideration needs to be given as to what happens during periods of unpaid leave and whether credits should be provided to avoid creating undue gaps in coverage.    

Many companies in Ireland are already making their own progressive changes together with a societal shift towards gender equality. Companies are incorporating diversity and inclusion into their ethos, slowly eradicating the legacy gender issues that have prevailed for decades.

Irish Life is committed to working on the challenge of the Gender Pension Gap, both within its own business and alongside the employers of Ireland. We have a number of plan solutions to help our members maximise their pension outcomes.

We welcome you with us on the journey towards balance.

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