Data from workplace pension provider, NOW: Pensions, has revealed that women were one of the hardest-hit groups during the pandemic and are 50% more likely than men to reach retirement with no private pension savings at all as a result.
The gender pay gap increased in the year to April 2021, according to the Office for National Statistics (ONS). This is partly because of the disproportionately high number of furloughed women. From carers and single parents to part-time workers, the pension savings gaps for some of the most financially at-risk groups have worsened during the pandemic.
The pandemic has impacted the financial situation of under pensioned groups in the short-term, in a number of ways, including:
- Employment rates, levels of part-time employment and the furlough scheme have disproportionately affected these groups
- Income levels have dropped more for under pensioned people on average
- Financial resilience, including the ability to keep up with bills, savings and debt is lower among these groups and has led to more hardship as a result of the pandemic
People in under-pensioned groups were more likely than average to experience labour market inequalities and be affected by furlough and redundancies. This is because they are more likely to work in the industries that have been most impacted by the public health restrictions such as retail, hospitality and tourism, or are in low-paid, part-time or irregular employment.
Unemployment reached a peak of 5.2% in Q4 2020, from a low of 3.8% in Q4 2019. Time spent out of the labour market disrupts the consistency of pension contributions and is therefore likely to lead to poorer retirement outcomes for those in under pensioned groups.
Despite the economic recovery experienced in the UK during 2021, it is very likely that under-pensioned groups will continue to be affected by the long-term effects of the pandemic.
According to NOW: Pensions, getting more people saving via automatic enrolment would be the most effective way to start closing the current savings gaps faced by the UK’s under-pensioned.
Removal of the £10,000 AE trigger would get an additional 2.8 million people saving into workplace pensions. Pension contributions from the first £1 would increase pension wealth for these groups by an average of 30% - though for some groups such as single mothers this would increase by 52%.
If both policies were introduced, we would generate an additional £1.2 billion in annual pension contributions.
Lauren Wilkinson, Senior Policy Researcher at the Pensions Policy Institute, comments: "The pandemic has provided a unique opportunity to observe how economic crises affect members of under pensioned groups. Developing a deeper understanding of the way in which changes in the labour market can impact future retirement outcomes of under pensioned groups can help to ensure that policies are designed to support them more effectively during the recovery from the pandemic-related economic crisis, as well as future crises and changes in the labour market, in order to achieve better retirement outcomes over the longer-term.’
Samantha Gould, Head of Campaigns at NOW: Pensions, adds: “It was very clear at the start of the pandemic that the under pensioned groups that we identified in our 2020 report would be the most financially affected by the economic downturn. They are more likely to work in sectors that have been severely impacted by closures, furlough and redundancies. In this report, we look at both the short-term and long-term effects of the pandemic.
"We need to ensure that everyone has the same opportunity to save for later life and so we are calling on the government to make the policy changes that were recommended by the 2017 Automatic Enrolment review as soon as possible so that we can enable these groups affected by the pandemic to recover at a faster rate. We hope that this report will help raise the profile of these savings gaps and motivate the industry and policymakers to close these pension savings gaps and create a fairer pension system.”