How she retires: Women and the pension conundrum

All over the world, longer life expectancies and ageing populations have led to a shortfall in retirement savings. This Phenomenon is even more prevalent among women. Women on the average live 5 years longer than men; this makes their retirement needs more pronounced and profound. In our Country where the women population is even larger, it calls for a deeper discussion which must ultimately influence policy.

In both developed and developing economies, the risk of poverty in old age falls disproportionately on women for very obvious reasons summarized below:

Interrupted Careers: It is not uncommon to find many women taking career breaks to meet important family needs. Whether it is for reproductive reasons, or following a spouse on a transfer, or giving up a career in the same organization as the man in fulfillment of company policy, or post-delivery complications or child care, women are mostly giving up careers for family. Interrupted careers mean interrupted pension savings and this can lead to a degree of poverty in old age.

Child care: Child care is the biggest job a woman has to grapple with and it is full time. Though many women perform this God-given role with excitement, it does come with a lot of commitment and sacrifice. Childcare pushes many women to put their careers on hold in order to nurture their children. This gets even elongated when these children come with special needs. As long as the woman remains away from work, her pension benefits suffer.

Part-time works: Again, by cultural and social design, especially in our part of the globe, many women end up with part-time jobs which obviously pay less. It is typical to ask a woman to take a part-time job in order to provide care for an ailing parent or in-law or to make up for the absence of a support system such as a domestic aid. Less pay means low pensions, low pensions is poverty.

Lower earnings: Even though the subject of lower earnings can be debatable as men also fall within this bracket, the majority of the victims are women. This is largely by virtue of career choices which are traditionally considered preserves for women and which do not pay as much. As we ‘think equal, build smart and innovate for change’ it is important to identify the inequality gaps and innovate for change that inspires freedom.

In many countries, retirement savings are only determined by savings made to a national pension scheme or a private scheme during a person’s working life. In our case in Ghana, it is the SSNIT or a Pension Trustees such as PenTrust. This means that depending on the flow and cycle of a woman’s work life, her pension benefits are simply proportionate to her savings. The situation is even dire among women in the informal sector who do not have any deliberate contributions towards old age. In such cases, retirement becomes daunting and dreadful with huge expectations of children and over-reliance on a partner for financial support in old age. But this carries its own risks in the event of divorce or the partner’s/child’s death, and can also rob women of financial freedom.

The gender pension gap is a persistent problem in many other countries. The EU report on gender parity shows that the average difference between men’s and women’s retirement income in member states is 36 per cent, more than twice the 16.3 per cent pay gap. Obviously, this should be higher in developing countries.

To tackle the gender pension gap, a lot needs to be done to ensure women are as financially prepared for retirement. An application of the solutions below should help reduce this gap as we keep this conversation open and ongoing until desired results are ultimately achieved.

Education: Closing the gender pension gap is about organizational culture. Companies must take a collective approach in providing regular pension advice to employees. Pension Trustees and Pension Fund Managers must do same and even so more actively. This should increase awareness and help employees take personal responsibilities for their pensions.

Spousal support: Spouses are encouraged to make continuous contributions when their wives are on career breaks especially for child care, family care and other health-related reasons.

Self-help/Do it yourself: Women are encouraged to assume full responsibility for their own retirement planning. It is important to consider personal pension plans as alternatives or additions to occupational pension plans to ensure financial freedom during retirement.

Informal sector schemes: Informal sector schemes must receive the needed support to develop tailor-made products for a rather fluid segment.

Pension Scheme Design: Our pension schemes must be flexible to accommodate the complex life cycle of women and must be easily accessible while providing some incentives such as offering care credits. The growing role of occupational pensions also calls for more stringent regulation to prevent inequality.

Close the gap: The gender pension gap is amplified by the pay gap. Pay inequalities lead to shortfalls in lifetime earnings. Countries such as Denmark have set labour market conditions via co-operation between government, employers and employees, which has helped close the gender pay and pension gaps. It will not be out of place to begin emulating such good examples. Helping women retain pension membership during extended maternity leave or childcare and encouraging employers or partners to contribute for them during breaks could address the gender pension gap.

The UK, for instance, has closed its gender pension gap from 44 per cent to 34 per cent between 2009 and 2016. However, the gap is below 10 per cent in Estonia, Denmark and Slovakia. Denmark could be an example to other developed countries. It has targeted the gender pension gap since 2005 with initiatives including education to address gender segregation, for example through women’s career choices, laws and initiatives to address the gender pay gap, and interventions on parental leave and care services to support female careers.

As the world celebrates International Women’s Day, I urge all Women, Lawmakers, Pensions Trustees, Pension Fund Administrators and Fund Managers, Government, Regulators and all relevant stakeholders to begin this important discussion on inequality in pension and innovate for change as we build smart resilient and financially independent women in old age.

Victoria Aligboh Armah

(General Manager for PenTrust, a Pension Trustee Company)