On average, women accrue 40 percent less pension than men. The reasons for this vary, but one fact is that it is very difficult to catch up later in life. Managers Annette Mosman (APG) and Yolanda Verdonk (ABP) brainstorm about fiscal, social and economic solutions. And above all: how can pension funds and pension administrators together create more awareness? “A pension statement will soon have to include how a divorce will affect your pension.”
Published on:
19 July 2023
As Top Woman of the Year, Annette is committed to putting Dutch women’s financial independence in the spotlight this year. As part of this, she is walking and talking with a number of women who are deeply involved in this topic to exchange perspectives. Annette will take these insights into account when writing the manifesto that will be presented to politicians in September.
Achieving (more) financial independence for women is not only positive for their self-esteem and position in society. A crucial benefit is also that it provides a more comfortable old age. After all, those who work more - or at least earn more - also accrue a better pension. And that’s badly needed, because the dismal status quo is that many women are a lot worse off than men in that respect: on average, their retirement incomes differ by as much as 40 percent. Sharing their concerns about this are APG CEO Annette Mosman and Yolanda Verdonk, executive director of ABP since 2022. Prior to her board position at ABP, Yolanda worked at the Dutch Railroads, where she rose from accountant to Director of HR & Organizational Development.
What also binds Annette and Yolanda is their determination to promote greater awareness among women around pensions. As pension fund and administrator, it makes sense to work together on this.
There are several causes that lead to insufficient pension accrual, they conclude, as they walk through the sun-drenched Betuwe region. Having children, part-time work, caring for others, divorce: these things all plays a role. The vast majority of care responsibilities still fall to women. A major reason is also the still existing wage gap, says Yolanda. “Whether women work full-time or part-time: the reality is that women are often paid less than men for the same work. Women also often work in sectors where wages are lower anyway, such as healthcare. With the consequence that you then also accrue less pension. And on top of that, the percentages paid into pensions differ per sector. In education and government, things are generally set up well. But I sometimes hear that people and employers in some sectors only pay very limited contributions and therefore people accrue considerably less pension. That has enormous consequences,” says Yolanda.
Wage gap
Annette: “We examined the pay gap at APG in 2019 and then closed it. You had a lot of experience with that in previous jobs.”
Yolanda: “That’s right. A wage gap occurs mainly in organizations where there are no established career paths. That is the root cause. If the successive career steps are formally defined for everyone in, for example, a pay scale, it is more likely for a pay gap to be avoided.”
Annette: “The size of the wage gap also depends on the type of business. For some jobs, you can set a pay scale. But at APG, for example, there are a lot of different jobs. And then there is also another dynamic. It takes women much longer to believe they are ready for the next career step. Men, however, are quick to think that they are quite capable of taking that next step.”
Yolanda: “As an employer, you can stimulate the flow of certain groups, of course. Because it is true that, in general, the female reflection is: can I do it? And a man is more likely to think: I’m just going to do it. So you need HR people in your company who are aware of this and actively guide them. This starts at the very beginning, with the recruitment and selection of new people. And then on to the development and advancement of existing employees.”
Role model
Annette: “One thing that is very helpful is if you have a role model in your environment. My mother worked. It was instilled in me that if you work as a woman, that makes a big difference. You are taught that you are the boss of your own future. That gives you freedom and choices.”
Yolanda: “I recognize that! Role models can play a great, inspiring role. For me, a working aunt I often visited was my role model in that regard. What is also important is for careers to be encouraged at home and the sacrifices that sometimes need to be made to be supported. That makes it easier to make strides.”
Pension deficit
Annette: “At what points does this pension deficit occur? We see this particularly when women have their first child and then start working part-time. If you work three days a week and then end up on your own, of course you can scale up again to more days, but you’re already missing out on accrual in your pension.”
Yolanda: “Divorce occurs around age 40, for many people. Even then it is quite difficult to compensate for a pension shortfall. That’s a lot of catching up to do. So the opportunity for improvement lies in raising awareness before that time, even before children arrive. Or as soon as people say: I’m going to work less, because I also want to be able to do other things that are of value to society. That is an underlying challenge, by the way, because those activities are very important for society and give a lot of personal satisfaction, but often lag behind in financial appreciation.”
Annette: “Yes, all that unpaid work, you really have to include that. How do we get a fairer distribution in that? And how can we compensate unpaid work financially?”
Government’s role
Yolanda: “It would be nice if there was more career flexibility. It should become easier to work part-time at a certain stage of life. But it should also be considered normal to work more afterwards. The government could encourage this more and society could be more open to it. Tax rules are also important, of course. There are already opportunities to catch up on pension accrual. So that you can save extra pension money in a phase of life in which you may be working more than in previous years. As a fund, we could point this out even more. And at the same time, the tax options could also be further expanded.”
Annette: “I think that is important input for my manifesto. We inform participants via their Uniform Pension Statement (UPO) about what they can expect. And if that is too little, they have to take action. Save up. But actually, as you get older, your scope for action gets smaller and smaller. That’s why it should be possible for the amount you can deduct for tax purposes for your retirement to be higher at a later age. Because that way you increase someone’s action perspective.”
Pension fund’s role
Yolanda: “As a pension fund, we want to provide even more insight and clarity - in line with the stage of life a person is in. And create awareness, especially in the phase where people are at the beginning of their careers. A couple of years ago, we launched an appealing initiative to this end with the online tool Reality Check, making our participants aware of the financial consequences of choices they make. Working part-time, buying a house, getting divorced, you name it. Reality Check was a hit; the e-learning is highly appreciated, especially by the - mostly - women who used it.”
Annette: “Young people don’t read those UPOs, because retirement is too far in their future.”
Yolanda: “That’s true. There also lies a challenge to make pension accrual clear in a more appealing and simple way. For many young people, retirement is not synonymous with stopping altogether, and more and more people are continuing to work longer. So I think there are some starting points there. As a pension fund, how do you connect more to the entire life cycle?”
Divorce
Annette: “Your UPO now says: this is your retirement pension, if you die, your partner will receive this amount. Your partner doesn't get that statement; he or she has to find out through you. But people are much more likely to get divorced before retirement. In that case, you have to give up some of your retirement money to your partner later. Not everyone knows that. And women who work part-time often only look at the income they need now, with growing children, and when they go to sign the divorce agreement, they think: those pension rights, I’ll waive them. So we have to put that in the UPO as well: what does a divorce mean for your pension?”
Yolanda: “Yes, that’s one way and I see many more opportunities. As a pension fund, we already have the best interests of our participants at heart. It is central to our decisions. We want to maintain and build on that. Pensions need to become much clearer for everyone. Women in particular need to think about their pensions sooner.”
Annette: “We will have a great opportunity for that soon, when we inform all participants about how the renewed pension system will affect them.”
Offer added value
Yolanda: “That’s why it features prominently in ABP’s strategy. We want to offer people more insight and that goes beyond the minimum legal requirements. Young participants have also indicated that they would like to know at an early stage what their pension will look like in the long term. A pension fund with a pension administrator can do that together.”
Annette: “In terms of offering added value, there is still a world to be won. Both ABP's new strategy and our own strategy contain many starting points for this. We're also conducting research in this area. We're conducting experiments with Geldvinder and Kandoor. So the intention is there. We have to think carefully at the administrative level about how we can offer this added value in the coming years. But: first and foremost, we have to get the transformation to the renewed pension system right. Because if something goes wrong there, we will lose the confidence of the public. And then there will be no one left to listen to you that you can offer added value to.”
Yolanda: “I completely agree! We really need each other during the move to the new pension system. And the great thing is: if we do it right, it is a tremendous opportunity to gain confidence.”
Annette: “That will only be possible if you hold on to each other. Now that the Pension Act is here, the pressure is only going to increase. All of society is watching us, so to speak.”
Yolanda: “We can’t quite envision everything we are going to face yet, but we do share the conviction that we are going to make it happen together. That confidence gives energy and we need to continue that.”
Annette: “And in the meantime we can think about the future. And it is fun to do that together.”