Pensions Bulletin 2023/23
Pensions & benefits Pensions dashboards Policy & regulation
- DWP publishes gender pensions gap statistics
- Pensions Regulator calls on DC trustees to do more to support their members
- PASA to publish guidance on co-ordinating AVC information for pensions dashboards
- PASA promises more guidance on data issues
DWP publishes gender pensions gap statistics
Hot on the heels of the formation of the Pensions Equity Group (see Pensions Bulletin 2023/22), the DWP has assisted with the first of the Group’s objectives by publishing statistics that for the first time examine the gender pensions gap in private pensions across Great Britain.
These statistics have been welcomed by LCP and we highlighted some of the key findings being:
- The gender pensions gap, which measures the median difference in the amount of private pension wealth held by men and women at around normal minimum pension age – currently 55 – (and before the pension has been accessed) is estimated to be 35%; it excludes people who have zero pension wealth
- By age group, the gap is smallest for those in their thirties (as little as 10%), peaks for those in their forties (approaching 50%), before falling back at older ages – DWP says that this pattern is similar to the trajectory of the gender pay gap
- In 2006-08, the gap was 42%; it has fluctuated since then but at 35% is currently (2018-20) lower than in 2006-08
- In 2021, around £52 billion was paid into the private pensions of women eligible for automatic enrolment compared with £62.6 billion into the pensions of men
The DWP is committed to regular reporting of these statistics and is to seek views on the appropriate frequency with which to publish revisions as new data becomes available.
Comment
We welcome these statistics as a first step in tackling gender inequalities in pensions. The gender gap percentages in particular are a useful snapshot of the position within private pensions at the current time across different age cohorts, but inevitably reflect life experiences to date.
Although the headline ‘35% at age 55’ is of concern, we should hope to see this narrowing over time as auto-enrolment, which has been very beneficial for women and should increasingly be so once the Government implements the 2017 review, will have more of an impact for future 55-year-olds. And perversely, and not a cause for celebration, the gap is also likely to narrow as a result of the decline of DB provision in the private sector. This is likely to result in worse pension savings for both sexes but will have a greater impact on men.
However, a gap at some level is likely to persist so long as women take more time than men out of the labour market to raise a family (including through part-time working), and a gender pay gap for this and other reasons continues.
Insofar as the state pension is concerned, we should see much more progress as the substantial changes that have been made will progressively reduce and ultimately eliminate the state pension gender gap.
Pensions Regulator calls on DC trustees to do more to support their members
In a blog focussed on DC trustees, Louise Davey, Director of Regulatory Policy, Analysis and Advice at the Pensions Regulator, calls on DC trustees to use the Regulator’s guidance, published in January 2023 (see Pensions Bulletin 2023/02), to protect those DC members close to retirement who could be adversely impacted depending on the investment strategy of the scheme. In particular, she implies that where long-duration bonds form part of the mix (traditionally used to back annuities) they may not align with what is needed to support likely member benefit decisions at retirement. Ms Davey goes on to urge schemes to engage with those approaching retirement to review and update their choices.
The requirement to review the default strategy and performance of the default arrangement at least every three years is mentioned. And with younger members in mind, Ms Davey says that it is vital that trustees provide more-up-to-date context in DC annual benefit statements to reflect the gap between the end of the investment performance period being reported on and when statements are issued. In other words, this suggests that the Regulator thinks that trustees should consider putting in commentary about events that have happened after the reporting period.
Various other issues are mentioned, with a clear worry that there is not enough meaningful engagement between DC trustees and their members, whether getting close to retirement or much earlier in their careers.
Comment
The Regulator is clearly getting worried that this year’s DC statement season may unnerve some members, such as those close to retirement finding that they have been pursuing a decumulation strategy that does not measure up to how they intend to access their DC pot. And for those comforted by seeing regular progress with their DC pot year-in, year-out, without looking under the covers, a statement showing a clear loss in value can be very troubling, especially in the current economic climate.
The point made about those approaching retirement reviewing and updating their choices is particularly important and comes after the gilt crisis last autumn. At that time, it was clear that many schemes were still in lifestyle investment strategies that target annuities, despite many scheme members having no intention of buying an annuity, and as a result being adversely affected by the gilt crisis.
PASA to publish guidance on co-ordinating AVC information for pensions dashboards
The Pensions Administration Standards Association has published an update on co-ordinating AVC information for pensions dashboards in which it signals that it will publish industry good practice guidance on 8 June 2023 (with an accompanying webinar).
This guidance, aimed at trustees/scheme managers of DB schemes where the administration of AVCs is undertaken by a different administrator to the main scheme benefits, will set out three potential options for the co-ordination of AVC information. These are: the main administrator will make both the DB and AVC values available to the ecosystem; administrators will provide values separately but in a linked manner so that pensions dashboards can connect the benefits; and complete separation.
PASA also says that it will be issuing a questionnaire (expected to be in June) to AVC providers to understand from them which of the three options for making AVC data available to pensions dashboards they will support and whether they would be happy to publish their responses to aid schemes.
Comment
Whilst responsibility for the provision of AVC information to the ecosystem rests squarely with the main scheme trustees, in practice they typically have to rely entirely on the AVC provider to at least gather the information. And the pensions dashboard regulations in turn don’t require an explicit connection to be made between main scheme and AVCs so that it is clear to members that the AVCs are an extension to the main scheme – something of vital importance when it comes to taking benefits. We welcome PASA’s efforts to achieve the necessary co-ordination which will also be of clear benefit to scheme members.
PASA promises more guidance on data issues
The Pensions Administration Standards Association has published a video blog in which plans for future publications by its Data Working Group are highlighted after recapping on recent activity by the group.
Several pieces of guidance are promised during 2023 on various data topics, including data for GMP conversion, data for benefits and data accuracy. The group is also working with the Pensions Regulator to look at how PASA can help the pensions industry to get the most out of data scoring, and may publish some guidance in this area. Finally, the group is to publish guidance on data quality for DC arrangements and for automation and strategy.
