Survivors’ pensions - pensions that are derived from rights acquired by the individual’s spouse - were a feasible solution to the problem of gender inequality in retirement and living standards in the recent past. But current increases in divorce rates along with a decrease in marriage rates, and the rise in women’s participation in the labour force that questions the "male breadwinner" model necessitate a change in the forms of redistribution, claim Carole Bonnet and Jean-Michael Hourriez from INED.
Survivors’ pensions – a solution that will not be sufficient anymore
Until around 15 years ago the debate about gender inequalities in pensions was largely neglected. This was presumably because gender inequalities in pensions do not necessarily result in inequalities in the standard of living during retirement, at least not in stable unions. Lower individual pensions among women would have only become problematic in widowhood, prior to which spouses had been sharing resources. But in many European countries (including Germany, Italy, France, Scandinavia and the English-speaking countries) there was a solution to women’s lower pensions in widowhood: survivors’ pensions. Survivors’ pensions aim at compensating for the loss of resources after a spouse’s death (most of the time the husband’s death, as men have shorter life expectancies than women) and, if sufficiently generous, allow for maintaining standards of living for widows.
Yet, the arrival of a new family context – where fewer people marry and more divorce – brought into question whether survivors’ pensions will be a sufficient means to cushion gender inequalities in retirement in the future. According to Bonnet and Hourriez, the survivors’ pension systems, whatever their levels of generosity, will no longer be able to ensure comparable living standards for men and women in retirement, as the group of single women will be larger and more diverse, being comprised of widowed, divorced and never married women. Women who are divorced or never married will receive little or no survivors’ pension. Their standard of living could drop below that of retired couples unless legislation is amended.
Need for personal pension rights
This presumption suggests that women will need to acquire their own pension rights rather than relying on those of their husbands. The “dual career model“ was set to substitute “the male breadwinner model”, and thereby allows women to increase their pension rights. However, the new model has thus far not fully achieved this goal and the gap between the genders persists. Furthermore, Bonnet and Hourriez argue that the pension reforms underway in most countries reinforce the link between pensions and career trajectories, which could play against women.
Women’s position in the labour market
The gender gap at present is the cumulative result of lower female participation in the labour market, the higher frequency of part-time employment, and lower wages compared with males over time. Currently, women’s monthly incomes are 25 per cent lower than men’s in France and this gap is found even in the countries that are “furthest ahead”, like Sweden and Denmark. There has been only a slow decrease in these differences in the past two decades, according to Bonnet and Hourriez, and therefore they expect the gender gap to persist in the future. Due to women’s involvement in household work, they spend 33 per cent less time in paid work than men. This means that even if hourly wages were identical, women’s pension benefits would be 67 per cent of those of men, if we assume a pure contributive system.
Other forms of redistribution from men to women
There are multiple forms of redistribution, such as pension calculation rules, contribution credits, minimum pensions, and family rights. Bonnet and Hourriez argue that pension calculation rules in the French system are generally unfavourable for people with low wages and/or short careers, and thus for women. The contribution credits (for periods of unemployment, illness, disability) also do not directly benefit women, except in the case of maternity leave. The latter two forms of redistribution are more favourable for the female population as they guarantee a minimum pension, as well as various family rights: contribution credits for mothers, old-age insurance for non-working parents (which compensates for career interruptions due to childbearing), and pension bonuses for parents of three and more children. Bonnet and Hourriez claim that in France,
An alternative mechanism for the collective coverage of widowhood – survivors’ pensions – is, for example, optional or obligatory insurance coverage for the risk of widowhood. With an optional insurance couples could use their savings and life insurance to cover a drop in income in the case of a spouse’s death. In the latter option, the couple would either pay higher contributions or receive lower pension payments in return for the survivor’s pension. The lower pension payments mechanism is available in Sweden’s funded public pension plan.
Bonnet and Hourriez also discuss a redistribution option to cover the risk of divorce that already exist in some countries: As women contribute to their husbands’ pension rights acquisition prior to divorce, but cannot benefit from them after separation, a solution could be “to split pension rights by pooling the pension rights acquired by both members of the couple during the marriage and diving them evenly between the two”. However, this marital rights mechanism also has its drawbacks: for example, it applies only to formal unions, covers only the period of marriage, and is not always favourable to individuals if it replaces survivor pension.
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This Population Digest has been published with financial support from the Progress Programme of the European Union in the framework of the project “Supporting a Partnership for Enhancing Europe’s Capacity to Tackle Demographic and Societal Change”.