MILLIONS of women working in local government will see their pensions improve under new reforms coming into force in April, as the government takes action to close the gender pension gap, the government has announced. Financial advisers applauded the reforms as “meaningful change” and said they should be used to educate the private sector.
The reforms, the government says, will directly benefit working people on the front line of public services, serving school lunches, cleaning buildings, managing libraries and cleaning streets.
Measures include making gender pension gap data reporting statutory and making unpaid additional maternity, shared parental and adoption leave automatically pensionable.
Around three-quarters of the scheme’s near seven million members are women and one of the most significant causes of the gender pension gap is due to maternity leave.
Making unpaid additional maternity leave automatically pensionable is a critical step that will help close the gender pension gap.
Pension system imbalance
Minister for Local Government and Homelessness, Alison McGovern, said: “It is shocking that this gender imbalance in our pension system has persisted so long, and I am proud that these reforms will help correct this historic inequality.
“These crucial changes will give hard working cleaners, librarians, school cooks and other public servants the security in retirement they deserve.”
Minister for Pensions, Torsten Bell, said: ”For too long, women have been penalised in retirement simply for having children. These reforms mean that for millions of women working in local government, taking time out to care for a new baby will no longer cost them their pension security.
“This is about a pension system that works for modern families and properly values the vital contribution of working women across our public services.”
Other measures include backdated payments and increased future pension payments to ensure that all surviving partners of eligible members are given the same pension as other survivors regardless of the type of relationship they were in.
Due to issues with the existing regulations, there have been instances where people in same-sex marriages and civil partnerships have received a more generous pension entitlement than those in opposite-sex marriages and partnerships.
Removal of age cap
Under these new reforms, all discrimination on the basis of the sex of those affected will be removed.
Another reform will remove an age cap currently in place that requires a Local Government Pension Scheme (LGPS) member to have died before the age of 75 for their survivor to receive a lump sum payment.
The government is also taking steps to keep people in the scheme by enhancing data collection on why people opt out, in a bid to ensure as many people as possible benefit.
Financial advisers welcomed the reforms. Jess Best, Independent Financial Planner at Godalming-based McLaren Capital, said: “For as long as women can have children, there will always be a gender pension gap and this is a huge step towards tackling this amongst the civil service.
“Women need more retirement savings than men since they statistically live longer and are more likely to have critical illnesses too and it is great to see the government recognising this.
“We must now use this public sector reform to educate the private sector where the gender pension gap is much greater; all you have to do is ask your female colleagues how many of them reduced their pension contributions when they returned from maternity leave.
“The gap itself goes far beyond career breaks to raise families. Making unpaid maternity leave automatically pensionable will really help women build their private pension savings when we all know the state pension simply is not enough for a comfortable retirement.”
Women punished for having children
Molly Pile, Chartered financial adviser at Octopus Money, added: “The gender pension gap actively punishes women for having children. What starts as a relatively small hit early on quietly compounds, and by the time many women see the full impact, they’re already nearing retirement. It can be staggering when compared to their male peers.
“Career breaks for maternity and caring are the main reasons women end up with lower pensions, so making unpaid additional maternity leave automatically pensionable is a really meaningful change because it gives some recognition to the fact that caring for a family shouldn’t come with a hidden financial penalty.
“There have been decades of financial imbalance for women so it is encouraging to see pension reforms that take us in the right direction. This does start to fix some of the mechanics that have quietly stacked the odds against women.
“But these gaps don’t close on their own, so talking about them, creating awareness and starting with small changes will help millions of women have the retirement they deserve.”
