10/03/2021 - Governments need to address the gender gap in retirement savings arrangements, according to a new OECD report.
The gender pension gap, or the difference in retirement income that men and women receive, averages 26% across OECD countries. This inequality is the result of many interconnected and complicated factors relating to society, employment, childcare, education, and individual bias. While retirement savings arrangements cannot correct all of these factors, their design should at least avoid increasing inequalities, and at best reduce the impact that existing inequalities can have on the retirement benefits that women will receive.
Towards Improved Retirement Savings Outcomes for Women analyses why the gender pension gap exists and outlines clear policy actions to ensure that the design of funded and private retirement savings arrangements will help to reduce the gender pension gap.
“Still today, the design of retirement savings arrangements sometimes disadvantages women compared to men, for example when eligibility criteria based on working hours or earnings restrict plan access, when contributions stop during periods of maternity leave, or when women do not get their share of retirement benefit entitlements upon divorce”, said Juan Yermo, Chief of Staff to the OECD Secretary-General. “Policy makers need to account for and address the factors that can lead to gender inequalities, and should strive to design gender-neutral retirement savings arrangements”.
Key actions that policy makers should take to reduce the gender pension gap for retirement savings arrangements are:
Increase the availability of these arrangements in industries predominantly employing women;
Relax eligibility requirements so more women are able to participate in retirement savings plans;
Implement automatic enrolment and provide financial incentives for women to join and save in plans;
Tailor communication to women to raise their awareness of the importance of saving;
Allow flexibility for women to contribute to plans however and when they can;
Implement non-conservative default investment options to overcome women’s risk aversion;
Ensure women receive a fair share of the retirement benefit entitlements accumulated within a relationship;
Consider women’s longer life expectancies in the design of the options to provide retirement income from these plans.