Another by product of austerity economics is the squeeze on savings for a pension. That is bad news for workers and a potentially massive burden on public services.
The annual Scottish Widows Women and Pensions Report highlighted a further drop in the amount workers are able to put aside for their pensions. In particular, the number of women saving adequately for their retirement has reached an all-time low, with just four in 10 UK women putting enough away in their pension pot - typically £1000 less per year than men. Women are on average putting £2184 away per year into a pension pot while men are saving £3120.
Older women are also more likely to be relying on their partner’s pensions and suffer in pension terms from career breaks. In the Scottish Local Government Pension Scheme (LGPS) women receive an average pension that is only half that of men (£3.5k compared to £7k), despite having similar average pensionable pay.
The report urged politicians and the industry to "work harder" to understand the obstacles to building a retirement pot faced by women, who are often forced to prioritise more immediate family needs over long- term saving.
While the focus of this report is women, men are not in a much better position. In the last few years of austerity economics less income is being squeezed, so that workers simply don't have the surplus income to put into a pension pot. In addition the loss of quality defined benefit pension schemes means more workers are relying on poor quality schemes with high costs that deliver poor returns on investment.
With a high proportion of women workers, maintaining the quality of public sector pension schemes is particularly important. Early indications are that auto-enrolment is working by getting more women, particularly older and part-time workers into the schemes. In the Scottish LGPS our audit shows that even before auto-enrolment women were entering the scheme at a higher level than you might expect given the preponderance of part-time working.
The overall gender split is 72% female to 28% male. In terms of membership of the Scottish LGPS, 26% of female members are not in the scheme compared with 21% of men. The difference is not as great as might be expected given the much larger proportion of part-time female members. For example, 40% of women not in the scheme work less than 10 hours. There is also a rough correlation between men and women in the scheme by age. The most significant outlier is actually young men aged 21-30 who are less likely to be in the scheme. It would appear young women are more sensible.
These issues have been important considerations in the negotiations over a new Scottish LGPS. Members should by now have received their ballot papers and an explanatory leaflet explaining how we have focused on keeping contributions stable, to keep as many members as possible in the scheme at this difficult time.
However, the real challenge is getting the quarter of the local government workforce into the pension scheme, along with many more in the wider workforce as highlighted by today’s report. That requires governments to understand that workers can only save for a pension if they have disposable income – and that means proper pay rises. Without that the demographic time bomb will explode with a vengeance.