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28 October 2016

How can women’s pension shortfall be addressed?

John Cridland
The interim report of the Independent Review of State Pension Age, chaired by John Cridland, and published earlier this month, sets out a clear analysis of the issues relating to the affordability and fairness of potential future increases in state pension age. It recognises the issues of fairness within and between generations, including those between men and women.
Financial security is key to well-being in retirement and this will be as true for future generations of pensioners as it is for those who are already retired. While the universal state pension will provide a guaranteed minimum income for the majority of people in future, for most this will need to be supplemented by private income. Future generations will need to save for their later life but will also need to work for longer if they are to enjoy a decent living standard. The report identifies those groups who are more at risk of having insufficient income in later life and who are more likely to rely on the state pension; these include carers, people with disabilities, the self-employed, ethnic minorities and women.
The report draws on research that shows that men are projected to have around a 25 per cent higher income on average than women in their first year of retirement. This equates to a difference of approximately £3,000 per annum.

Men and women across all generations are set to receive very similar amounts of State Pension. The discrepancy in pension outcomes for men and women instead reflects different private pension outcomes. On average across all generations, just under 30 per cent of women’s total pension is made up of private (most often occupational) pension, compared to just over 40 per cent of men’s. These private pension outcomes reflect the fact that women currently earn on average less than men across their working lives and are more likely to take career breaks and this is assumed to continue into the future.

The report recognises that for many couples decisions around work and caring have been taken jointly and for them the important factor may be overall household pension income. However, the report asks two questions:

  1. What is the best way to take into account the lower pension outcomes for women in our recommendations?
  2. For older workers in particular, the adequacy of income in retirement may be best considered at a household level. However, when planning future changes to the pension system, how reliable is this assessment now and how reliable will it be for future generations?

You can read the full report here.

27 October 2016

A decade of regression for UK women

The latest report from the World Economic Forum shows just how much women in the UK have lost out over the past decade.

Through its Global Gender Gap Report, the World Economic Forum quantifies the magnitude of gender disparities and tracks their progress over time, with a specific focus on the relative gaps between women and men across four key areas: health, education, economy and politics. The 2016 Report covers 144 countries.

The gender pay gap is measured as part of the WEF’s Economic Participation and Opportunity subindex. 11 countries (three less than last year), including four from Sub-Saharan Africa—Burundi, Botswana, Rwanda and Ghana—and three Nordic countries—Norway, Iceland, and Sweden—have closed more than 80 per cent of their gap. However, 19 countries have closed less than 50 per cent of the gap, with Pakistan and Syria holding the last two spots. Thirty-two countries have scores below the world average (0.586, weighted by population) on this subindex.

While the UK has risen to 20th from 18th place in the overall rankings, it is still well below its top 10 position in 2006. On wage equality for similar work the UK ranks 52nd, and on estimated earned income, 92nd. Even allowing for quibbles over statistical comparability, this is a lamentable score.

You can read the full report here.

A third of companies lack data on the gender pay gap

With gender pay gap reporting only six months away, a study by the incentive compensation firm Xactly has revealed that 49 per cent of UK executives believe that the gender pay-gap is ‘a natural prejudice against women’. 250 UK C-Level executives from large organisations were interviewed for the survey.
The research aimed to explore the reasons behind the gap and its repercussions, and discovered that 62 per cent of those surveyed think that women taking time out of their careers to have children is the main cause of the pay-gap. Quite surprising really, given that over a third of those surveyed admitted that they lack the data and skills needed to identify the gap. If they lack the data, how can they ascribe a cause?
More positively, 82 per cent say their business has a clear strategy to review and close the gap.
Publicity for the report quotes Claire Cockerton, CEO, Here East Innovation Centre, who said:
“Changing perceptions about women’s abilities in the workplace is a stubborn challenge to address. Though we may not realise it, many of us carry preconceived ideas and unconscious biases about women in business. This has once again been highlighted by research today, which has found that nearly half (49%) of UK C-level executives believe the reason for the pay gap is natural prejudice. The fact that nearly half recognise this however, does mean it can be addressed. This elevates an issue which everyone should play a part in rectifying, both female and male, those who have been advocating for equal pay for years, and those who once might not have thought it their place.
Men play a vital role in ensuring that change happens; unfortunately, this is an issue that today, too few men address. The Women in the Workplace 2016 study, for instance, highlighted a growing cultural challenge with the lack of conviction and engagement from senior board-level male staff on gender issues.
It goes without saying that organisations should have a clear compensation philosophy; one that has mandatory salary transparency across genders in businesses and that is based on third-party salary data, ensuring each individual is paid fairly according to the market rate for their skills and experience. But beyond the policy change which delivers better equality to businesses, we also now need the champions of the philosophy and strong enactors of a fair and equally-accommodating corporate culture. We need strong male and female voices; and those who find themselves in leadership positions in companies need to take the requisite responsibility for tipping the scale – which means we need to see a lot more male leaders at the table driving forward diversity and gender equality.”

You can read the report here.

14 October 2016

Finance firms committ to tackling the gender pay gap

The UK's leading financial firms have published targets for improving gender diversity in senior roles, and narrowing the gender pay gap along with their strategies for achieving those targets over the next five years.

Of the 72 firms who have signed the Treasury-backed Women in Finance Charter since it was set up earlier this year, 60 have committed to filling 30 per cent of senior roles with women by 2021. Eight companies have included an ambition or target relevant to the gender pay gap in their commitment.

Actions firms have committed to include reducing the gender pay gap at senior management level, review and monitoring of pay levels by gender, and publishing gender pay gap information in advance of the April 2018 publication date.

Financial services is the UK's highest paid sector but also the one with the widest gender pay gap, at 39.5 per cent,  compared with 19.2 per cent across the economy as a whole.

The Women in Finance Charter was established in March in response to the report from Virgin Money’s Jayne-Anne Gadhia, which found that women currently hold about 23 per cent of positions on UK boards but only 14 per cent of executive committee roles.

Firms signed up to the Charter commit to four actions to improve gender diversity: setting internal targets for gender diversity in their senior management; publishing progress reports annually against these targets; appointing a senior executive responsible for gender diversity and inclusion; and linking their executives' remuneration packages to gender diversity targets. As none of these relate directly to the gender pay gap, it is heartening to see that some signatories recognise the need to tackle the challenge head-on.

In response to the publication of targets, Theresa May, the prime minister, said that the UK's "world leading" financial services sector could "do even better if it made the most of many talented women who work in finance".

"It is good news that so many firms have signed the Women in Finance Charter and are now dedicating themselves to tackling gender inequality," she said. "They recognise the business case for doing so and with ambitious targets to deepen the female talent pool, these firms are leading the way."

"I want to see a diverse sector run by talented men and women and I look forward to seeing many more businesses promoting women and helping to make the UK the best place in the world to do business," May said.

7 October 2016

Civil Service Pay Gap widens

The newly released Civil Service Statistics for 2016 show that the gender pay gap in the Civil Service has widened. The figures also show an increasing feminisation of the Service.

At 31 March 2016, 54.2 per cent of all Civil Service employees were women, up 0.4 percentage points from 31 March 2015, with the proportion of women increasing in all responsibility levels. In the Executive Officer and Administrative responsibility levels there were more women than men. The proportion of female Grade 6 and 7s (the middling grades) has been steadily increasing, from 38.1 per cent in 2008 to 44.8 per cent in 2016, while the proportion of women working at Senior Civil Service level was 40.1 per cent, an increase of 1.2 percentage points from 2015 and 8.2 percentage points up on 31 March 2008.
More than 80 per cent of civil servants were in the 30 to 59 age group. Since 31 March 2015 there has been an increase in age band 16 to 19 of 330 (27.5 per cent) and age band 20 to 29 of 2,590 (6.5 per cent). All other age bands showed a decrease.
There were more women than men in the 20 to 29, 30 to 39, 40 to 49 and 50 to 59 age bands. There were more males than females in the 16-19, 60-64 and 65 and over age bands.
The gender pay gap for all employees was calculated as the difference between the median pay for males and females. The report does not include the gender pay gap calculated according to the mean.
The median gender pay gap increased from 12.0 per cent in March 2015 to 13.6 per cent in March 2016. The gender pay gap for full-time employees increased from 9.0 per cent to 12.0 per cent. There was a fall from 15.4 per cent to 11.5 per cent for part-time employees. For the “all employees” category the largest gender pay gap is for Senior and Higher Executive Officers, increasing from 3.8 per cent to 4.6 per cent. The Senior Civil Service level gender pay gap fell from 4.9 per cent to 3.7 per cent from March 2015 to March 2016.
While the report does not attempt to explain the widening of the gender pay gap, I think it may have something to do with the starting salaries for those entering the service. The report does not give details of the number of recruits entering at the different levels of responsibility, nor does it give the gender distribution of those entrants, but if the number of men entering at higher levels of responsibility (and therefore attracting higher salaries) is greater than the number of women, then this would tend to widen the gender pay gap. Similarly, if men entering the Service, at whatever level of responsibility, are put on higher starting salaries than their female counterparts, then this too would tend to widen the gap. I hope the Civil Service will dig a bit deeper into its statistics and find out why women appear to be losing out.
You can read the full report here.
For further information, contact Neil Hedges,  01633 456741