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Recent success in reducing defined benefit (DB) and state pension gender gaps could be undermined if inequalities between men and women in defined contribution (DC) pensions continue to rise, consultancy LCP has warned.
LCP's research showed that the gender pension gap in state pensions has almost been eliminated for the newly retired, with a freedom for information reply showing that there was a gap of just 2 per cent between the state pensions of newly retired men and women in 2022/23.
Furthermore, it showed that full equality is expected to be attained during the 2030s, thanks to the phased introduction of the new state pension which began in 2016.
The gap between men and women is also set to fall sharply amongst private sector DB pensions, although this was not because of improvements amongst women, but because men’s pensions are set to decline dramatically.
The report explained that men have in the past been the main beneficiaries of private sector DB, with the fall therefore reflecting the impact of scheme closures.
In addition to this, it pointed out that DB pensions remain open in the public sector where the majority of the workforce in the NHS, teaching and local government is female.
Despite the narrowing state and DB gender gap, LCP forecast growing inequalities between men and women in the DC space, estimating that the DC gender pensions gap will rise from the current £25 per week, to over £30 per week by the mid-2040s.
The firm's report identified six primary sources for the gender pension inequality: the gender pay gap, the 'caregiver penalty', the 'longevity penalty', relationship breakdown, differences in the impact of rules on auto-enrolment and differences in financial confidence.
However, the report suggested that improvements could be made, outlining a series of calls for action directed to government, employers and the pensions industry.
In particular, LCP urged the government to continue with the annual publication of gender pension gap statistics, with more commentary on underlying causes and a commitment to tackle them.
Alongside this, it recommended that the government take further steps to reduce the inequalities which arise following the birth of a child, including effective policies on shared parenting and greater provision of support for childcare for the youngest children.
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