C Explanatory memorandum
by Ms Čurdová, rapporteur
1 Introduction
1.1 Preparation of the report
1. Ms Čurdová was appointed rapporteur for this report
on 5 December 2008, following a motion for a resolution initiated
by her on 19 September 2008, which was referred to the Committee
on Equal Opportunities for Women and Men for report. As part of
the preparation of this report, at the rapporteur’s suggestion,
the committee appointed an expert, Dr Vít Samek of the Czech Republic,
who submitted his report
Note on 30 November
2009. Subsequently, on 25 March 2010, at its meeting in Paris, the
committee held an exchange of views with two experts, Dr Samek and
Dr Jay Ginn, a consultant from the United Kingdom, who each made
a PowerPoint presentation in support of their analysis.
Note
2. Given the technical nature of the subject, the rapporteur,
who is convinced, for the most part, of the validity of the experts’
analysis and the solutions they propose, will refer both to the
expert paper prepared by Dr Samek and to the two PowerPoint presentations.
1.2 The issues involved
3. There is generally an appreciable difference between
women’s and men’s pensions in the Council of Europe member countries.
Dr Samek states that women’s personal pensions represent only 30%
to 60% of men’s, although the difference may be partially offset
by transfers of public money. Married women who work receive only
70% to 80% of what men receive over their lifetime.
Note
4. Many elderly women are poor because they have no pension or
their pension is insufficient.
Note On average,
younger women have much lower personal incomes than men, which leads
to small pensions later in life. In other words, the wage gap between
women and men is passed on in the form of a gap between women’s and
men’s pensions. Furthermore, women have frequently played a role
in raising children and caring for dependent persons. These periods
are not, or only partially, taken into account. Traditional pension
systems, based for the most part on uninterrupted career patterns
and therefore primarily designed for men, are accordingly obsolete
because they are unsuited to present-day requirements.
5. Studying pensions therefore means considering and comparing
the incomes of elderly women and men. What income should be taken
into consideration? In line with the approach recommended by Dr
Ginn,
Note the rapporteur proposes
focusing on personal income – which gives a better idea of each
individual’s personal situation – rather than on household income.
6. A look at poverty rates shows the higher degree of poverty
among women.
Note In the 27 European Union countries, with
the exception of Hungary, women are poorer than men. In Estonia,
Latvia and Lithuania, for example, the poverty rates for women/men
over 65 years of age are respectively 39%/21%, 39%/22% and 38%/15%,
that is, roughly twice as high among women as among men. The gap
is smaller in other countries, but almost exclusively to the detriment
of women.
7. A study of income by ethnic category in the United Kingdom
Note has
shown that women are significantly poorer in the Pakistani-Bangladeshi
communities, with greater differences of income between women and men,
the difference being less pronounced in the Black community.
8. More detailed, gender-disaggregated data on old people’s pensions
and income would provide a clearer understanding of the problem
and at least raise awareness of it both among politicians and in
civil society.
2 The desire to retain
viable pensions in Europe
2.1 Diverse pension systems in
Europe
9. The design of pension schemes differs greatly among
countries around Europe. How pension schemes and pension benefits
look like depends crucially on choices made about system elements,
including membership criteria (voluntary vs. mandatory), management
of the scheme (public vs. private), possible income policy or other
social goals embodied in pension systems (insurance and equivalence
vs. redistribution), the financing method used (funded vs. pay-as-you-go)
and procedures for determining the size of a future pension benefit
(defined benefit vs. defined contribution schemes). As most national
pension systems are comprised of more than one tier, combinations
of system elements are found in many cases.
2.2 The desire to retain adequate
and viable pensions
10. All member states of the Council of Europe have highlighted
the challenge of an ageing population and its implications for the
maintenance of adequate and sustainable pensions. To avert the worst
far-reaching implications of this process, they try to safeguard
the capacity of current pension systems to meet their social objectives,
to maintain their financial sustainability and to meet changing
societal needs. The aim of pension financial sustainability is in
very tight relation to a broader societal objective of financing
people’s right to decent (that is, above poverty line), adequate
(that is, in line with working lifestyle) and predictable (that
is, political consensus, clear rules and benefit formula and security)
pensions so as to ensure social cohesion and equity.
11. National strategies on pension reforms mostly ensure that
most people earn pension rights and provide a minimum level of income
to older people who earned insufficient pension entitlements. An
important achievement of pension systems is that old age is no longer
synonymous with poverty. Particularly in those member states where
poverty risks remain high, a broad range of measures to improve
minimum income guarantees and various benefits in cash and in kind
are being introduced.
12. In order to avoid all discrimination based on gender, the
objective of retaining viable pensions in European states should
accordingly be combined with that of avoiding all discrimination
against women.
3 The causes of insufficient
pensions for women
13. The employment history of elderly women, whether
or not they worked mainly full-time, and their socio-economic and
marital status have an influence on the receipt and amount of public
(state), occupational and personal pensions. However, even elderly
women who worked full-time with few career breaks may be disadvantaged
in pension terms if their income is compared with that of men. This
finding reflects the many different factors and the complexity of
the causes explaining the pension gap between women and men.
14. The gap between women’s and men’s pensions is mainly accounted
for by two major categories of factors.
3.1 The wage gap between women
and men
15. As already stressed by the rapporteur in her report
on “Discrimination against women in the workforce and the workplace”,
Note women
earn less on average than men in their lifetime and thus they receive
smaller pensions when they retire. The rapporteur also refers to
Mr Wille’s excellent report of 2 February 2010 on “The wage gap
between women and men”,
Note which highlights the existence of
discrimination against women as the main factor contributing to
wage differences.
16. There are several possible explanations for this phenomenon:
women work less during their lifetime (periods of maternity leave
and part-time work) and women have less of a career, as they are
often discriminated against when it comes to promotions to higher-earning
posts: this is usually called “vertical occupational segregation
by sex”. As the ILO points out: “Women’s lower educational attainments
and intermittent career paths are not, contrary to conventional
belief, the main reason for gender differentials in pay. Other factors,
such as occupational segregation, biased pay structures and job
classification systems, and decentralised or weak collective bargaining,
appear to be more important determinants of inequalities in pay.”
Note
17. Apart from women’s lower pensions, it is important to see
the tight interrelation of female length of life and feminisation
of poverty: since women live longer, for some period of their life,
they share their pension with their partner; however, when he dies,
they are left to live on their pension which is usually much lower
than their living standards. One example connected to women’s pensions
is pension insurance – as women live longer and although they generally
earn less, to attain a final sum similar to men they are expected
to pay higher sums for their monthly pension insurance.
18. Finally, economic recessions often affect women more than
men as far as unemployment is concerned (many companies unfortunately
still believe that it is more important to keep a male “breadwinner”
in employment) and women’s needs or the determination to keep on
working therefore leads them to accept levels of pay not consonant
with the principles of equality and fairness or dissuades them from
reporting cases of discrimination for fear of losing their jobs.
3.2 A pension system unsuited to
women’s career patterns
19. Current pension systems take little or no account
of the career patterns of women who, in addition to periods of maternity
leave, bear the bulk of the responsibility in the home for domestic
tasks and caring for children and elderly relatives. Traditional
pension systems are mainly consistent with an uninterrupted career, that
is, they are tailored primarily to men’s careers.
20. For example, where the birth of children is concerned, a study
of the median earnings of women by life course stage shows that
income decreases between the birth and the 4th birthday of a child.
Having children has a limiting effect on lifelong income.
Note
21. Many couples separate and single-parent families are often
headed by mothers in serious financial difficulty.
22. Women are often forced to work half-time either because conditions
on the employment market are such that they cannot find a full-time
job or because they have to look after children if there are no
appropriate childcare facilities.
23. Similarly, with high rates of divorce and remarriage, survivors’
pensions are disconnected from the changes in society. These pensions
have been abolished in the individualised Swedish system
Note which
is based on the personal award of a pension to the individual, irrespective
of marital status. It is an individual right allowing everyone to
obtain appropriate pension entitlement.
24. Furthermore, some pension system reforms carried out in the
European Union countries between 1995 and 2005 were to the detriment
of women. For example, 19 countries raised the age of entitlement
to a state pension, 15 reduced the amount of the pension, 14 increased
the contribution rate, 12 increased the minimum number of years
of contribution to be eligible for a full pension (which is more
difficult for women to obtain), six reduced the cost-of-living adjustment
(to the detriment of women, who live longer). Most countries changed
to privately funded pensions (the risks of which weigh more heavily
on women, who have smaller pensions).
Note
25. In general, national pension systems based on universal coverage
through public earnings-related schemes (first pillar), private
occupational schemes or private saving schemes (second pillar) and
individual retirement provision (third pillar)
Note provide good opportunities
for most Europeans (able to pay the relevant contributions) to maintain
their living standards after retirement. As a result, and in combination
with other tax-benefit policies for pensioners, older people, in
most member states, generally may achieve a fair, and in some member
states even relatively high, living standard (more in so-called
“old member states” of the European Union, less in the new ones
and in the other member states of the Council of Europe).
26. However, Dr Ginn draws attention to the higher poverty rate
in Great Britain and Ireland compared with Luxembourg,
Note noting that in the first two
countries the state pension rate is only 40% while it is considerably higher
in Luxembourg. From this she infers a correlation between the poverty
rate and the proportion accounted for by the state pension in the
total amount of the pension. The larger the share of the state pension in
the total amount of the pension, the larger women’s pensions will
be and the lower the poverty rate.
27. Younger women are marrying later, having fewer children (later)
and are employed longer. However, labour market inequalities persist.
Pension reforms involve cuts to the value of state pensions, thereby
eroding their redistributive function, and the shift to privately
funded pensions are favouring the “masculine life course”. Changing
family forms with more and more women raising children on their
own and increases in the number of divorces are rendering survivors’
pensions obsolete.
28. The rapporteur believes that these systems are obsolete and
will need to be revised to take account of present-day requirements.
In particular, account will have to be taken of the fact that private
pensions funded by a fixed contribution are unfavourable to women
because there is no redistribution to help the lower paid and there
are no credits for caring for children and elderly people. If, in
addition, these pensions were to be voluntary, they would be smaller
for women, who would not be able to contribute as much, and would
leave individuals exposed to market risks. Dr Samek in fact showed
that in the Czech Republic, if the ongoing reforms lead to the setting
up of a fully private system, the system would very quickly reach
its limits, increasing not only the pension deficit but also the
inequalities between women and men.
Note Reforms to pension
systems in the transition economies of the countries of central
and eastern Europe have increased pension inequalities to the detriment
of women because the wage gap is widening, there is less state aid
for the lower paid, survivor’s pensions have been reduced and the
method of calculating years of pensionable service is still unclear.
In addition to this, the number of single or divorced women is increasing.
Note
4 Recommendations
29. As we noted earlier, gender inequality of income
in later life is linked to inequality in earlier employment, to
its forms and working conditions and, first of all, to differences
in remuneration between women and men, but also to the nature of
national pension systems, the role and the balance of public, occupational
and personal pensions. In addition to women’s lower earnings, their
diverse patterns of employment, in terms of the timing of periods
of full-time, part-time and non-employment, may affect both state
and non-state pension income.
30. As stated in
Recommendation
1700 (2005) on discrimination against women in the workforce and
the workplace, discrimination against women with regard to pension
rights will not disappear as a matter of course. Nor can we rely
on market mechanisms by themselves to end the problem. If it is
to be ended it will require the involvement of all the parties concerned,
as part of a well thought out, deliberate and coherent policy over
a sufficient period of time.
31. The rapporteur is convinced that female poverty and the pensions
gap that women suffer are not inevitable. There is no single solution
because the pension situation varies according to country, the labour market
and the state of pension reforms, but certain general lessons emerge
from the foregoing analysis.
32. The rapporteur therefore invites her colleagues to support
her strong political commitment to dealing with this problem because
there are certain reforms of the labour market and pensions systems
and other measures that can help to achieve greater equality between
women and men in the pensions field.
4.1 Better access to the labour
market and equal pay
34. The rapporteur is convinced that this will go a long way towards
ending the discrimination that women suffer, both in their working
lives and when they enter retirement.
35. The first step is to reduce the gap between the pay of women
and men by ensuring equal access to education, including that of
migrant women and women from ethnic minorities.
36. Adequately paid parental leave shared between both parents
would involve men in this process and help to secure more equal
pension entitlements. In Sweden, for example, both parents are entitled
to parental leave paid at 78% of their previous earnings.
Note
37. Following breaks in their working lives, employees should
have the right to go back to their previous employment, if necessary
with flexible working hours.
38. Finally, greater gender parity among those occupying leading
positions in economic and social decision-making bodies would lead
to better economic governance and offer women more interesting career prospects.
Note
4.2 A mixed and balanced pension
system
39. The rapporteur first wishes to point out that the
financial sustainability of pension systems is a necessary precondition
for an adequate provision of pensions in the future. Failure to
ensure the financial sustainability of pensions systems in the long
term will seriously jeopardise the adequacy of public and private
pension systems and would have other adverse economic consequences
as well. Over the past years, member states have recognised the
urgency of making pension systems financially stable in view of
the limited time that exists before the ageing population takes
effect.
40. In particular in the period of the current financial and economic
crisis, an approach based on raising employment rates, reducing
public debt levels and reforming pensions systems in member states
is urgently needed. Long-term fiscal sustainability of public and
private pension systems should be a major issue in all member states
of the Council of Europe.
41. For the sake of social cohesion and human dignity, retirement
pensions should be sufficient to offer everyone a reasonable standard
of living. In the interests of fairness, how pensions are calculated
should take account of individual circumstances and be based on
more than one factor. They should include a minimum element determined
by the country of residence and also be partly proportional to income,
though there should also be universal eligibility for state pensions
based on the redistribution principle. At all events, the total pension
should be at least equal to, or higher than, the national poverty
threshold. Retirement pensions should be indexed-linked to the general
cost of living.
42. The rapporteur is convinced of the need for solidarity to
overcome disparities between women and men.
43. To avert poverty in old age for both women and men, member
states have to save current strong redistributive elements into
their first-pillar pension schemes, notably in the form of minimum
pension guarantees or credits for certain periods without pensionable
income (for example, unemployment, parental leave, etc.). This has
contributed to reducing income disparities among pensioners, often
more than among the population as a whole. To avert poverty of women
in old age, it would be very useful to add specific components of
mandatory splitting of pension rights between men and women after
the divorce in the current public pay-as-you-go pension schemes
and, where these do not exist, both based on the defined benefit
principle and on defined contributions as well.
44. Assuming that pensions systems only incorporate these recommendations
in part or over a period of time, a number of alternative temporary
measures could be introduced, including ones to ensure a minimum standard
of living such as free electricity or public transport or a food
allowance. Such measures could also take the form of supplements
to the minimum pension.
45. Private pensions, meanwhile, widen the equality gap between
the sexes and there is a need for a major reform of primarily private
systems. The best way of reducing their negative effects on women
would be to make certain adjustments to both contributions and pension
levels.
46. Such adjustments are needed to take account of women’s particular
circumstances, such as sufficient pension credits for time taken
off to care for children or dependent persons.
Note
4.3 Additional measures to ensure
more equal pensions
47. Sharing household and childcare tasks is a factor
for greater equality between women and men. Such joint acceptance
of responsibility contributes to individual development, including
each partner’s occupational or career development. Clearly, this
calls first for awareness-raising measures to secure a change in
cultures and attitudes, as was pointed out in the report of a former
chair of the committee, on “Involving men in achieving gender equality”.
Note
48. Finally, affordable and good quality services to look after
children and other dependent persons are essential ingredients of
personal emancipation, particularly that of women, who are too often
left alone to tend to the care and well-being of children and elderly
persons.
49. To enable women to acquire the necessary number of contribution
years, if this has not been achieved by other means, employers should
be banned from forcing people to retire at 60 or 65. But in any
case, even if raising the retirement age enables women to increase
their number of working years, this will be pointless if the number
of years of work required is also raised. Moreover, women aged 50
to 60 often have to look after parents or grandchildren. In these
circumstances, employers are often reluctant to offer them decent
working conditions. In any case, if it were allowed there would
be nothing to prevent women from working beyond the legal age of
retirement.
Note
4.4 The particular issue of the
impact of the crisis
50. The current economic crisis has worsened the prospects
for pensions equality between women and men.
Note
51. The financial and economic crisis has interrupted or postponed
putting in place comprehensive strategies for ensuring the sustainability
of pension systems and public finances as a whole in accordance
with the three-pronged strategy incorporated in the framework of
the Broad Economic Policy Guidelines of the European Union, as well
as budgetary consolidation and reforms of pension systems. In many
countries, high debt ratios and the interest burden they entail
still hamper budgetary consolidation of pension systems. Furthermore,
large increases in expenditure on public pensions and financial
gaps are likely to emerge. Further pension reforms are needed, in
particular in those member states which have not yet safeguarded
the long-term sustainability of their pension systems.
52. It is necessary to continue establishing reserve funds in
public pension schemes with the aim of avoiding large increases
in contribution rates, in creating better opportunities for supplementary
private provision and private funding, thus reducing pressures for
public expenditure increases, to evaluate positive and negative effects
of radical pension reforms such as changing public pension systems
to private savings (so-called “opt-out pension scenario” in Slovakia,
Poland, Hungary, etc.) which, taking into account disparity between
women’s and men’s remuneration, confirms prolongation of such disparity
in pensions as well, or to notional defined-contribution systems
(in Sweden, Poland, etc.), with the aim of stabilising contribution
rates across generations and incorporating better incentives to
work, thus contributing also to meet the objective of higher employment rates.
53. Reform measures to improve financial sustainability in member
states of the Council of Europe have in the vast majority of cases
led to the reduction of benefits and pension rights of workers,
women and men. These measures have included increasing pension eligibility
age (in central and eastern Europe countries through the consecutive
cancelling of the difference in the eligibility age of men and women,
which was protective until now of women), increasing the supply
of older workers on the labour market, changes in the way wage earnings
are measured to calculate benefits, change from wage indexation
to price indexation, moving from defined benefit to defined contribution
pension plans mentioned above to protect sponsors of pension plans
against longevity and investment risks. Impacts of most of these
measures are more negative for women than for men.
54. To conclude, the rapporteur calls for 1. retirement policies
that are based on greater solidarity between women and men, with
the aid of positive measures to assist women; 2. amendments to or
the framing of pensions legislation so that it not only forbids
discrimination but also stipulates clearly that there is an obligation to
prevent discrimination and promote equality, with the aid of measures
that take account of women’s particular circumstances; 3. taking
into account gender equality during discussions on pension reforms;
4. effective machinery to ensure that this legislation is enforced.
55. The rapporteur refers to the preliminary draft resolution
and recommendation found above and suggests to submit this report
to the Assembly during the third part-session (21-25 June 2010).
