Pensions and Gender Equality: Policy paper for the Commission on a Gender-Equal Economy

Lowe, Jonquil (2020). Pensions and Gender Equality: Policy paper for the Commission on a Gender-Equal Economy. Women's Budget Group.



Due to their much greater likelihood of taking on unpaid care responsibilities, women face disadvantages in the labour market compared to men. Not only does this result in a gender pay gap of around 17% in the UK during women’s working lives but an even larger gender pension gap in retirement of 36%. While part of any long-term solution to this gender inequality would address the labour-market disadvantages, there is no inevitable association between a pay gap and a pension gap. The design of pension systems can offset, perpetuate or exacerbate the inequality. The new UK state pension system is more gender equal than the pre-2016 state system and a major strength of both systems is the protection of carers’ pension rights since 1978. However, transitional rules mean that it will be another 20 years before women receive the same state pensions as men. Moreover, while the government considers the new state pension to be enough to live on, it is around 40% lower than the level deemed adequate by independent sources. The UK private pension system is highly unequal with the capacity to save and the associated tax reliefs heavily skewed towards men. As a result, the median pension wealth of women on the brink of retirement is just half that of men. The cost of pension tax reliefs in UK was £35.4 billion in 2017- 18. This compared with public spending on state pensions of about £94 billion (Great Britain). All pensions, however financed or calculated, are claims on future national income and so, to the extent that these claims are met, involve a transfer of national income from the working population to the retired population. The most economically efficient way to ensure equal, adequate and reliable retirement incomes for women and men would be to replace the current patchy recognition of unpaid work and lottery of ability to save inherent in the current state and private pension systems with a state-funded universal basic income (UBI) for all retired people payable at a level of around £277 a week (£14,400 a year)1 . With an adequate retirement UBI, any additional provision for retirement would be a matter of personal choice with no need or justification for subsidies from taxpayers. Assuming the private pension tax relief saved was diverted to help fund UBI, as a percentage of GDP, the cost would be less than the current OECD average of public expenditure on pensions. There is, in any case, a lack of evidence to suggest that pension tax reliefs are effective at incentivising saving for retirement and the UK system of reliefs is highly regressive. In the absence of a retirement UBI, pension tax reliefs should still be scrapped and the amount used to finance state-funded carer credits to private pension schemes.

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