(SECURING WOMEN’S INCOME IN OLD AGE-IWD 2021).
Yesterday was International Women’s Day and around the world a lot is happening to shine the spotlight on women by celebrating their achievements, increasing visibility, and taking action for equality. The agenda is to forge a gender equal world.
The theme for this year’s celebration is #choosetochallenge and as aptly put by the originators of the whole IWD initiative, “a challenged world is an alert world and from challenge comes change.”
It is imperative therefore to alert and create awareness about the gender gap in pensions in Ghana by sharing the facts and challenging women themselves, policy makers, government, regulators and indeed anyone of influence in the pension space to pitch in to secure women’s income in old age.
Currently, the problem reflects both in lower pension coverage among women as compared to their male counterparts and lower pension benefits for women which obviously translates into higher risks of old age poverty for women.
Let me hasten to add though, that the gender pension gap is not necessarily a Ghanaian problem. In fact, according to a 2018 report authored by the World Economic Forum and titled, “The scary facts behind the gender pension gap”, the gender pensions gap, globally, is estimated at 30-40%, with the balances of women in retirement been less than men. Across Europe for example, the gender pension gap varies significantly between different countries, ranging from 4% to 49% but more than half have a gap of 30% or greater.
The situation is however more pronounced in our part of the world as according to research, “women form over 70% of entrepreneurs involved in micro and small-scale businesses in the private informal sector.” (The Role of Women in Ghana’s Economy-N. J. Amu).
Also, at People’s Pension, our work over the past 4 years in the pensions space and with a particular focus on the informal sector affirms this. Our data shows that women are in the minority, accounting for about 40% of our total member base, however they save more consistently although in smaller amounts. This rather interesting insight brings into sharp focus the fact that the greater percentage of women, are not currently covered by incumbent pension funds and that there needs to be that conscious strategy and effort to enrol women into pension schemes to provide them with income security in old age retirement.
Why are women worse off than men in retirement?
As has already been established, women tend to accrue less savings than men during their active work years but ironically, they typically will need more money than men when they retire. This is because women generally live longer than men and will thus have longer retirements, living 2.5 years longer from age 65 onwards. This means their retirement savings must be stretched over a longer time and an extra life span may also result in additional medical costs.
Income disparity is also a key factor for this situation. Throughout history, working women have earned less than men at every level of education and across careers. Other factors include time out of the workforce to start a family, care for sick relations etc. The gap although has narrowed over time is still a contributory factor and even more so in the informal space where women are largely involved in menial jobs and may make just enough money to take care of their immediate needs.
Cost sharing of expenses during retirement is another factor that is not a reality for most women as majority will outlive their husbands; given that women generally live longer than men. This means they will spend more time living alone in retirement and will have to shoulder all financial obligations alone.
Why are women not saving much?
As per our work in the field as I stated earlier, women are more likely to save for a shorter period in their entire work life. This is because they may work for fewer years as compared to their male counterparts as they will likely take breaks due to childbirth, care for sick relations and other family obligations. And as meaningful savings are made during active employment, they most certainly will lose out during that period.
Again, women save smaller amounts than men. This is due in part to differences in income, with women typically earning less than men especially in the formal work environment. In the informal sector, women are found more in casual, low-earning work which does not qualify them for statutory pension scheme deductions, meaning they need to make the conscious effort to take up a personal pension plan, which is largely not the case.
A research by Mercer, a global consultancy in Investments and Workforce and Careers, also indicates that “women have less financial courage and are less confident about their financial security in retirement then men.” This, they say contributes to women missing out on opportunities for long term growth of their savings, thereby having less money to live on retirement.
How is People’s Pension helping to remedy the situation?
One key objective of People’s Pension is to provide flexible, innovative, and digitally driven pension products to both individuals and companies in Ghana. The company is, however, passionate about making its solution accessible to underserved constituents such as women in the informal workspace.
Knowing first-hand the many challenges faced by women in preparing adequately for retirement, People’s Pension offers a personal pension product that is voluntary, secured, easy to access and flexible; this means, participants can join at their convenience, save any amount they want, whenever they want, preferably through mobile money payment platforms.
Integrating women is critical to us as their exclusion will increase their risk of old age poverty. So, although pensions are a long-term investment product, they, like other scheme members have a window to withdraw part of their savings to meet immediate needs before old age retirement.
Again, their nominated beneficiaries get to enjoy a life insurance cover of a sum assured, four times their previous calendar year’s contribution in the event of their unfortunate demise. This is embedded in the pension product and ensures that their dependants, if of school going age do not have to have their education cut short or the family left behind does not suffer financially due to their death. The sum assured is given in addition to the accrued benefit (total contribution made plus accrued interest) for the entire period they were on the scheme.
To also ensure they are not left out of the financial inclusion agenda, there is the means for them to register and make withdrawals using simple USSD technology that does not require internet connectivity, breaking distance barriers. We noticed a 34% rise in digital payments by women as compared to cash payments between 2019 and 2020, and this is quite significant, considering the adverse effects of COVID-19 on many businesses.
Intensive and aggressive engagement and education on pensions, financial literacy and business improvement programs are constantly ongoing to ensure they improve themselves, have control over their finances, increase their income security, and maximise their economic opportunities.
Indeed, female participation in our scheme just like in all aspects of our daily lives supports sustainability and at People’s Pension we are convinced that their comparatively low levels of economic empowerment, literacy and socio-economic empowerment should be the concern of all and that no one person or institution can do it all, a collaborative approach is the way to go.
What else can be done
The approach to designing pension schemes should be a first step to tackle this problem. Players in the industry should recognise and acknowledge the peculiar needs of men and women so they can target women with products, particularly, digitally driven products that addresses the factors for their inadequate pension savings, thereby bringing them into the financial inclusion space. This will give women the confidence to handle their finances better and even consider more prudent, less risky, and high yielding investment strategies.
In the formal work environment also, policies that promote pay equity between genders, should be critically considered as it would help remove the stumbling blocks that prevents women from accumulating enough funds for retirement.
Continuous education has proven time and again to be an effective tool to alert people on critical issues and to get them to respond to a specific call-to action. In that regard, a collaborative, extensive and intensive pension educational campaign led by the pensions regulator and supported by all the players in the industry will be influential in ensuring that women challenge themselves to a better tomorrow.
This is essential not only because of the awareness creation benefits, but also because of the boost in trust and confidence in pension products. Especially because women have mostly been the victims of the various financial scams and frauds that have been perpetrated by unscrupulous companies and individuals in the country.
Closing the gender pension gap will require cooperation and a determined effort from all-government, the regulator, pension players, employers, individuals, men and especially the women themselves. For the women, it is critical that they acknowledge that such a problem exists, accept the reality of inadequate retirement income security they could be confronted with and disabuse their minds that their husbands and children are their retirement plans and plan adequately towards it.
So, on International Women’s day, my fellow woman, #choosetochallenge yourself to #abettertomorrow. As we alert the government and other relevant stakeholders to do their part, be minded that it is only by committing to #abettertomorrow for yourself and working towards it that we can collectively close the gender pension gap.
The writer is the Head of Communications at People’s Pension Trust. She can be reached at [email protected]