Report reveals Covid pension contributions hit to vulnerable groups

Women are among underpensioned groups who have been hardest hit by the pandemic and who face an increased risk of reaching retirement with no private pensions savings, according to a new report.

Savings & Pensions

 

The impact of repeated lockdowns, home schooling and increased domestic responsibilities on women’s ability to work and save has forced 300,000 women out of workplace pension saving in the last year, according to new research.

Workplace pensions provider NOW: Pensions’ report, “Pandemics and Pension Inequality”, created in collaboration with the Pension Policy Institute (PPI), reveals 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.

It says all underpensioned groups have been affected, with women the worst impacted. This is due to:

  • Employment rates, levels of part-time employment and use of the Government’s job retention scheme (furlough) disproportionately affecting these groups
  • Income levels dropping more for underpensioned people on average
  • Lower financial resilience, including the ability to keep up with bills, savings and debt which has led to hardship
  • Struggles with affordability of and individual saving behaviour relating to pensions in particular during the pandemic
  • Challenges avoiding accessing pension savings during the periods of investment volatility experienced during 2020.

Other groups adversely affected include ethnic minorities [17% of whom were ineligible for automatic enrolment on a pension scheme, compared to 22% of women] and those with disabilities, particularly women [29% compared to 11% of men]. Over half (52%) of individuals with disabilities are spending significantly more on household bills and utilities than before the pandemic, and more than a third (37%) are spending somewhat more than they did previously.

The report found several common factors within these groups which are presenting barriers to saving. People in under-pensioned groups were more likely than average to experience labour market inequalities and be affected by furlough and redundancies. The report says 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.

It adds that 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 underpensioned groups. Women and people from BAME backgrounds are likely to have lower levels of financial resilience compared to other groups and this manifested in greater difficulty keeping up with bills and increasing debt levels during the pandemic.

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, says the report.

NOW: Pensions’ report recommends the removal of the £10,000 auto-enrolment trigger, saying it would get an additional 2.8 million people saving into workplace pensions, with pension contributions from the first £1 increasing pension wealth for these groups by an average of 30% – and 52% for single mothers.

Samantha Gould, Head of Campaigns at NOW: Pensions and report author, said: It was very clear at the start of the pandemic that the underpensioned 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 policy makers to close these pension savings gaps and create a fairer pension system.”



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