Low earners, young people and women risk being left out of the new auto-enrollment pension scheme, one of Britain’s leading investment firms has warned.
According to a study by Legal & General Investment Management (LGIM), women are more financially vulnerable due to divorce, maternity leave, menopause and lower average wages.
“The gender pension gap exists from day one and starts accelerating from age 35,” said Stuart Murphy, co-head of defined contributions at LGIM.
He said the age and income thresholds to qualify for Ireland’s new automatic registration system are too high and offer no protection for women taking time off to have children.
“Not only does age mean that women do not start saving as early as possible, but also […] They tend to earn less.”
Studies have shown that Irish women can expect to earn between a third and a half less than men in retirement.
Research by LGIM found that a 30-year-old who stops making pension contributions for just two years could see their final pension pot shrink by 10 percent.
One in ten women who experience menopausal symptoms quits their job, Murphy found.
“So women who’ve had career breaks or maybe haven’t saved as much the whole time are leaving the workforce when they’re potentially in their prime earning years.”
The government’s automatic enrollment system would add an estimated 750,000 additional workers to a pension plan from 2024 if they do not already have a private or occupational pension.
It is open to people between the ages of 23 and 60 with a minimum earnings of €20,000, who can opt out if they wish. Employers and the state are expected to combine or top up employee contributions.
“If you’re an 18 or 19-year-old starting your first job, or a 21-year-old, and it’s part of the commitment that you contribute to your pension from day one, it’s an integral part of your life’s employment said Tom O’Gorman, LGIM Sales Director for Ireland.
“Whereas suddenly you’re 23 and you’ve got £50 or £100 a month to fund your pension, it just changes your mindset and your attitude towards it.”
The UK’s auto-enrollment system, in place for a decade, has resulted in 40 per cent of people saving extra for retirement. But freelancers and women have fallen through the pension net in the UK, Mr Murphy said.
https://www.independent.ie/business/personal-finance/pensions/pensions-auto-enrolment-may-fail-women-and-low-earners-top-uk-firm-warns-42150551.html Automatic pension registration may fail for women and low earners, warns a leading UK company