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[Index]
FACT SHEET 3 |
Geneva, 15 December
2004 |
Gender Aspects of Social
Protection and Pensions in Ageing Europe
Regional Preparatory Meeting
for the 10-year Review of Implementation of
the
Beijing Platform for Action
Geneva, Switzerland, 14-15 December 2004
Social security schemes have been an important
arena of policy reforms throughout the UNECE
region during the last decade. So far gender
equality has been only a marginal consideration
in social security reforms. The drafting of
reform proposals, the public deliberations
around them, the political process leading
to reform decisions and the assessment of
preliminary experiences with reform have not
systematically included gender equality concerns.
During the past 10 years
governments have responded to emerging challenges
to welfare state systems, often of a financial
and demographic nature. Typically, reforms
were designed to reduce the burden of welfare
state provisions on the State budget, and
to ensure the financial sustainability of
social security. In UNECE countries with economies
in transition, welfare state institutions
and provisions had to be adjusted to be compatible
with a market economy environment. The efficiency
and effectiveness of the delivery of social
security benefits and services needed to be
increased, and greater transparency of benefit
administration was a popular demand in the
reform debates.
Why the issue
is important
It is by now widely recognized
that women and men are affected differently
by social security systems.
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Some gender differences
are caused by unequal social security
regulations and practices, others by differences
in the need for and use of social security,
and yet others by inequalities outside
the social security system as such, for
example in the labour market.
Social security is an important
tool for achieving gender equality:
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Time use, for example,
is influenced by family benefits. Benefits
can support parents in balancing work
and family responsibilities, for example
through the provision of childcare or
other care services, and though parental
leave schemes. In addition, creating incentives
for an increased use of family benefits
by fathers is an important step toward
more gender balance.
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In the light of demographic
trends, old age security remains a central
element of social security. Given the
greater numbers of women in old age and
the persistent gender inequality in lifetime
income and control over property, pension
schemes are particularly relevant for
women. Yet, most pension schemes currently
produce gender unequal outcomes, to the
disadvantage of women.
Key Facts
Family benefits
Expenditure for family benefits
and family support programmes, as a share
of GDP, have reportedly declined in a number
of UNECE countries over the last decade. This
trend is worrying, because a positive relationship
between expenditures for the birth, upbringing
and care of children and women’s employment
and labour force activity rates has been established.
In some countries, family benefits have also
lost in value as a consequence of insufficient
adjustment to inflation (see Table
1).
Pensions
- The private pension component, which was
introduced in a group of countries as a
second pillar of the pension scheme, is
by definition not redistributive. Pension
savings are accumulated in individual accounts.
Individual savings accounts for pensions
contribute further to women’s disadvantage
in pensions.
- This is mainly an effect of women’s
weaker labour market position (reflected
in lower incomes and lower pension contributions),
and their shorter total working life, mainly
due to childcare breaks.
- One advantage of such a system, however,
can be that all contributions, even those
paid during a short period of employment,
are reflected in the savings accumulated.
Previously, a number of restrictions to
pension contributions had applied regarding
the length of the employment contract or
hours worked, for example.
- The retirement age was increased by most
countries as part of their pension reforms.
Increases amounted to about two to three
years for men and three to six years for
women (see table
2). Even where increases are phased
in over an extended period of time (over
16 years in Estonia, 14 years in Hungary,
10 years in Latvia, for example), the reforms
demand greater adjustments on the part of
women.
- Formally equal treatment of women and
men with respect to their retirement ages
has not been achieved throughout the region.
Retirement ages for women and men have been
equalized only in a number of countries,
among them Estonia, Hungary and Latvia.
Most countries in the region, however, have
preserved a retirement age difference by
sex. In some countries (Poland, Slovenia),
initial proposals to equalize women’s
and men’s retirement ages were rejected
after public debates. The difference, where
maintained, is between two years in Slovenia
and five years in Poland, with other countries
in between. In the Czech Republic women’s
retirement age continues to depend on the
number of children that she had.
- While differences in women’s and
men’s retirement ages may be important
in all different pension schemes, it must
be emphasized that earlier retirement for
women has a particularly strong negative
impact in combination with a closer link
between contributions and benefits described
above. With the elimination of redistribution
towards workers with low lifetime contributions,
most women who retire early will receive
substantially lower benefits than before
the reforms.
Box 1. Stimulation of the
gender effect of the Polish pension
reform
A simulation of the Polish situation
shows the likely future effect of
the retreat from redistribution
through the pension reform. Under
the old rules, the average pension
paid to a woman who retires at 60
is about 82 per cent of that paid
to a man retiring at the same age.
Once the new NDC and privatized
schemes are fully phased in, the
average woman retiring at 60 will
receive just 74 per cent of the
average pension paid to a man with
the same retirement age.
Specifically, the typical woman
retiring at age 60 will draw a pension
equal to 22.4 per cent of the average
wage while her male counterpart
will draw one equal to 30.4 per
cent. Should they both retire at
65, the woman’s pension would
equal 29.2 per cent of the average
wage while the man’s would
equal 39.6 per cent. In both cases
the average woman’s pension
will be just 74 per cent of the
average man’s.
The effect of the five-year difference
in women’s and men’s
retirement age, too, is illustrated
in the Polish simulations. Once
the new mixed system is fully implemented,
a woman retiring at 60 with an average
female’s pension will receive
an amount equal to only 57 per cent
of a man retiring at 65 with an
average male’s pension. By
delaying retirement until 65, she
would receive a pension equal to
74 per cent of his (Wóycicka
et al. 2003).
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Pension credits for periods spent out of employment
in order to care for young children or other
family members have traditionally been an
important benefit for women in a great number
of countries, especially European countries
in transition. Pension reforms during the
1990s, however, brought revisions of caring
credits, often to women’s disadvantage.
Nowhere have reforms led to the inclusion
of other care responsibilities, elderly care
for example, as demographic developments might
suggest. Instead, carers in most pension systems,
notably in Central and Eastern Europe, are
penalized in their pension benefit accumulation
if they leave the labour market temporarily.
Some West European countries, however, have
designed caring credits to be virtually neutral
compared to work (Sweden) or independent from
an employment relationship (Germany).
Box 2. Caring
credits
Hungary,
for example, retained the old rules
for caring credits in the public component
of the new pension system, but applied
new rules to the new mandatory private
component adopted in 1998. In this
case, participants must contribute
6 per cent of their childcare benefit
to a commercially managed individual
savings account. As explained above,
their future pension benefits will
be calculated as a simple return on
this contribution – i.e. investment
performance minus management fees.
This private benefit will supplement
the individual’s public pension.
The amount of the public pension will
be reduced due to the diversion of
a part of the contribution to the
private tier. As with all other contributions
to the privatized component of the
pension system, there is no employer
matching contribution to the contribution
from the childcare benefit. However,
6 per cent of the childcare benefit
is a tiny amount, equal to less than
US$ 4 per month. Time off for caring
will thus reduce a carer’s benefit
portion from the private system substantially.
This policy is especially disadvantageous
for middle- and upper-income workers,
since the pension entitlements that
they earn while working are substantially
higher than those based on the childcare
benefit (Fultz & Steinhilber 2003).
Poland in turn, chose a transfer
from the State budget to finance caring
credits, making pension financing
more transparent and shifting the
burden of financing caring credits
to the public at large. However, the
subsidy is based on the minimum wage,
which makes the benefit much less
generous than it was before. As a
result, most individuals who take
leave from work to provide childcare
will receive lower pensions. As it
is almost exclusively women who take
leave and receive childcare benefits,
it is their earnings history, and
consequently their pensions, that
will be reduced. Moreover, the degree
to which carers are penalized in their
pension entitlements rises with their
income level (Wóycicka et al.
2003).
In Germany, a parent receives
one pension credit point per year.
This is available for three years,
regardless of whether the parent is
employed or not. If the parent is
employed, the caring credits are added
to the credits earned from obligatory
pension contributions withheld from
wages. For a parent with a low wage
(due, for example, to part-time work),
while the child is between 3 and 10
years old, pension contributions are
boosted by 50 per cent. However, they
cannot be higher than the contributions
from the average wage of all insured
during this calendar year.
In Sweden, childbirth credits
can be claimed by either parent and
are equal to the most advantageous
of (a) contributions based on 75 per
cent of average earnings for all covered
persons, (b) 80 per cent of the individual’s
own earnings in the year prior to
childbirth or (c) a supplement consisting
of a fixed amount indexed over time
to the (covered) per capita wage.
Individual calculations based on a
sample of actual earnings records
indicate that the system is nearly
neutral in its effect on the final
pension compared with the alternative
of working instead.
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Key challenges
/ Issues to consider
Link between family benefits
and women’s employability. Benefits
should be designed in a way to support women’s
employability.
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For example, where
childcare is overwhelmingly provided by
women, making long-term home care benefits
available through an employment relationship
creates incentives and rewards for labour
force participation.
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Conversely, if long-term
care benefits are restricted to those
with low incomes or limited means, mothers
who stay at home to care for young children
may become isolated from the world of
work and find their subsequent reintegration
into the labour market more difficult.
Also, the duration of leaves may have
negative effects on women’s employability.
Cash benefits for home care have been
shown to set incentives for a withdrawal
from the labour market, while provision
of services, especially care for children
below 3 years of age, tends to stimulate
greater labour market activity of mothers.
Sharing family caring responsibilities
more equally between women and men, and
achieving a more equal distribution in the
benefit take-up is a central goal for gender
equality policy in relation to social security.
Removing obstacles to fathers’ use
of family benefits is thus an important
step toward greater equality. However, while
formally equal treatment is necessary, other
measures are needed: parental leave periods
reserved for fathers, linking the childcare
benefit level to the previous wage and legally
guaranteed entitlements to part-time work
are some measures implemented by UNECE countries.
Systematic comparative evaluation of such
measures and sharing of experiences with
father-centered social security provisions
are an important area for further action
in the region.
Equalizing women’s and men’s
retirement ages appears to be a reasonable
demand in the interest of equal treatment.
Moreover, it is becoming a practical necessity
in pension systems that are strongly individualized,
and closely link contributions and benefits.
However, the equalization of retirement
ages typically demands greater adjustments
on the part of women than men, since lowering
men’s retirement age does not appear
like a viable financial solution.
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A higher retirement
age for women is likely to create a considerable
strain on established patterns of childcare
provision within the family and new demands
on institutional childcare services, which
need to be addressed.
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Individualization
of benefit entitlement accumulation and
the retreat from redistribution in pension
systems is advantageous to women and men
with higher incomes, and hurts all workers,
women or men, with lower ones. If the
pension system is based on individual
accumulation of pension rights and links
contributions and benefits closely, then
abolishing gender inequalities in the
labour market and in care responsibilities
becomes all the more important.
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In order to achieve
greater gender equality by promoting a
more equal distribution of unpaid care
responsibilities, and in order to uplift
the social value of care work, pension
systems need to ensure that carers are
not penalized. The detrimental effect
of caring on pension entitlements constitutes
a clear disincentive for men to take over
a greater share of care responsibilities.
Caring credits in pension schemes are
therefore important instruments of gender
mainstreaming in pensions.
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Regulations regarding
the treatment of gender differences in
life expectancies in private pensions
are a central issue still to be solved
in a number of UNECE member states. Separate
life expectancy tables for women and men
will result in lower monthly benefits
for women or higher monthly contributions
during her working life. In contrast,
unisex life tables will lead to equal
monthly benefits, but potentially higher
lifetime benefits, on average. The current
practice of sex-differentiated premiums
or annuities in private pension insurance
is attracting increasing resistance on
the basis of the argument that it has
to be considered discrimination and not
actuarially fair risk-assessment.
Tables
Table
1. The value of family allowance benefits,
1990-1997
Table
2. Retirement ages for men and women
in EU accession countries
Table
3. New childcare initiatives
Table
4. Key issues for gender equality in
old-age security
For further information, please contact:
Ewa Ruminska-Zimny
Coordinator, Beijing +10 Regional Meeting
United Nations Economic Commission for
Europe (UNECE)
Palais des Nations – Office 329-1
CH-1211 Geneva 10, Switzerland
Phone: +41 (0) 22 917 16 98
Fax: +41 (0) 22 917 00 36
E-mail: [email protected]
Web site: http://www.unece.org/oes/gender
References
"Gender Aspects of
Social Security and Pensions in the UNECE
Region” - Secretariat Note for the
Regional Preparatory Meeting for the 10-Year
Review of Implementation of the Beijing
Platform for Action (Beijing +10) - ECE/AC.28/2004/8
Report from the Regional Symposium on Gender
Mainstreaming into Economic Policies,
28-30 January 2004 (http://www.unece.org/oes/gender/documents/REPORT.pdf)
Ref: ECE/GEN/04/N05
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