Ireland’s auto-enrolment pension scheme could widen the gender pension gap due to a lack of flexibility to allow women to increase their contributions to make up for periods of leave, Irish Life has warned.

The long-awaited Automatic Enrolment Retirement Savings System Bill was passed by the Dáil earlier this month, with the scheme now expected to launch in early 2025. However, nothing in the bill has been added in to allow more flexibility around pension contributions, which could help ease the gender pension gap by allowing women to make up for periods of leave.

A report by Irish Life titled, Gender Pension Parity 2024, stated that as well as a lack of flexibility built into the AE bill on pension contribution increases, there is also no clarity on what happens when women are on leave.

“We believe this is likely to widen the gender pension gap,” Irish Life’s report stated.

In addition to this, Irish Life identified several other rules within the auto-enrolment scheme that could exacerbate the gender pension gap, which it presented to the Oireachtas Committee before the passing of the bill.

For example, women tend to be on lower salaries or working part-time so any de minimis eligibility criteria to join a scheme will disproportionally affect more women than men. It therefore recommends removing the eligibility criteria based on salary or working hours to allow all employees access to pension schemes.

Another issue is the mandatory retirement age; women are more likely to have gaps in their pension provision, so mandatory retirement will limit women's ability to increase their pot size. There is also no tax-efficient mechanism to allow partners/spouses to contribute to pension schemes during periods of unpaid leave.

Its report, which looked in depth at the causes and solutions of the gender pension gap, found a gender pension gap of 36 per cent in Ireland after analysing data from over 130,000 Irish Life DC plan members. This means women in Ireland will need to work eight years longer to retire with the same pension pot as men.

The two main drivers identified in its report that lead to such a stark gender pension gap are salary differences and time out of the workforce. In Ireland, women’s salaries are on average, 22 per cent less than men’s and combined with six years of leave out of the workforce for women, (mainly maternity leave and family caring responsibilities), results in significant differences in accumulated pension funds.

The impact of this aligns with the 2023 OECD finding that working women are 50 per cent more at risk than men of pension poverty due to inadequate pension funding. This is particularly important as women can expect to live longer in retirement due to their higher life expectancy.

The data shows that the average age to start a pension is the same for both men and women and that men and women contribute comparable percentages of salary, confirming that saving habits play no role in the gender pension gap.

In a foreword for the report, Irish Life group company secretary and head of public policy, Teresa Kelly-Oroz, said: “With auto-enrolment on the horizon, there has never been a better time to gender proof the world of pension policy…. We need to arm our women with the knowledge to make informed choices and we need to provide corporates with the tools to make progress at an organisational level. However, support from state policymakers will also be crucial in closing the gap.”

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