Narrowing the Gender Retirement Savings Gap
To successfully make positive change, companies first need to acknowledge the reality of the gender savings gap in retirement. For most, educating employees is a key first step followed by targeted communications to those most at risk. It’s important to always consider reviewing representation of decision makers to ensure it is reflective of the workforce and have targeted communications for key life stages and financial wellbeing education. For example, identify how much to contribute to get back on track after maternity leave or offer timely reminders to maximize tax advantages (e.g., voluntary tax-efficient top-ups each tax year).
Then, develop retirement benefits that are affordable, accessible, flexible and consistent. It’s not always about spending more, but rather, a reallocation of how firms spend benefit dollars.
Here are some tips for rolling out the principles of an affordable, accessible, flexible and consistent retirement plan.
- Affordable: Provide a minimum level of retirement benefits that is not contingent on employee savings. Consider a high match on first savings (up to a cap) or a flat amount of benefits to funnel more savings to lower-paid employees.
- Accessible: Make plans more accessible by shortening eligibility and vesting periods, extending benefits to part-time employees, and providing benefits during caregiver leaves or catch-up contributions.
- Flexible: Shared parental leave and other flexible working opportunities all contribute to gender equity, making it easier for employees to save. Flexibility also enables broader financial wellbeing support to meet employees where they are — for example, access to emergency savings, student loan payments and life planning accounts.
- Consistent: Avoid different benefit structures for different populations, helping to eliminate bias in plan design. Employers can review access to and equity of spousal benefits, facilitate lifetime income and move away from service-based benefits where possible. Use data to ensure no inequities are unintentionally created in the process.
Additional action to close the gender savings gap is taking place at the legislative level in many countries, with the passing of several measures and more likely on the horizon. Examples of this include the requirement for employers to pay retirement contributions while on parental leave or give parents a “pension contribution baby bonus,” which could be partially or fully rebated by the government.
Even further, an Australian firm developed a comprehensive package of employee benefits including the novel idea of paying an additional 2 percent retirement plan superannuation contribution for female staff. Mindful of anti-discrimination laws, they approached the Human Rights Commission for a ruling. The Commission ruled that the action was a special measure designed to achieve substantial equity between men and women. Since then, other organizations have developed female-friendly retirement policies.