The gender pension gap, or the difference in retirement income that men and women receive, remains substantial at 26 per cent on average in the OECD. It is a clear result and signal of gender inequalities along the life cycle, despite the significant progress made to reduce them in pension systems over the last decades. Retirement savings arrangements are playing a growing role in this gender pension gap.

Closing the gender pension gap for retirement savings arrangements poses a particular challenge, given that the income from these arrangements is closely linked to employment and income patterns. This link means that gender differences with respect to labour market participation and gender wage gaps, which are reinforced by women’s disproportionate role as caretakers, will directly contribute to the gender pension gap. These labour market differences affect every stage of preparing financially for retirement, from access to and participation in retirement savings arrangements, to the level of contributions made throughout one’s career, through to the level of income received in retirement. The design of retirement savings arrangements alone cannot correct for all labour market differences. Nevertheless, it should strive to reduce the impact that these factors will have on the retirement income of women, or at least ensure that inequalities are not exacerbated.

There has been progress over the last two decades in reducing the gender differences that have been driving the gender pension gap. Women have joined the labour force in increasing numbers and the gender pay gap has decreased by 5 percentage points. These trends have been aided by more and more women completing higher education and by changing societal attitudes about the role of women as homemakers and caretakers. Increased employment and higher wages have flowed directly through to improved retirement savings and entitlements for women.

Nevertheless, there is still a long way to go to achieve gender parity, and the ongoing COVID-19 crisis is threatening this progress, particularly given the pandemic’s adverse impact on women. Women are more likely to be employed in the most heavily impacted sectors, such as hospitality, tourism and retail. They are also more likely to hold part-time work, positions which are more vulnerable to lay-offs. Furthermore, women have shouldered the brunt of children’s education following school closures, as well as other caretaker responsibilities. These responsibilities have led many women to reduce their working hours or withdraw from employment, thereby reducing their ability to contribute to their retirement savings plans. Women’s retirement income is also more likely to be negatively impacted by the indirect effects of the pandemic, such as the potential increase in divorce rates following lockdown measures or policies that have allowed individuals to withdraw their retirement savings in response to the pandemic.

It is therefore even more urgent that policy makers take measures to address the gender pension gap and ensure that we do not reverse the progress made. While the situation calls for measures beyond the pension system to help women overcome barriers to working and address pay gaps, attention still needs to be paid to the design of retirement savings arrangements to ensure that it is not exacerbating gender inequalities in retirement. This report sheds some light on the drivers of the gender pension gap and provides concrete policy options that governments can consider for the design of retirement savings arrangements to help continue the progress made in reducing the gender pension gap.

Mathilde Mesnard

Deputy Director, OECD Directorate for Financial and Entreprise Affairs

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