State auto-enrolment (AE) contribution credits for career breaks could “radically change” the framework of occupational pensions and help reduce the inequality of the widening gender pensions gap, Hymans Robertson has said.

In an open letter to the Work and Pensions Select Committee, Hymans Robertson partner, Chris Noon, argued that whilst the introduction of AE contribution credits would be a "significant cost" to government, time away from work is the biggest contributor to the gender pensions gap and needs to be addressed.

Noon suggested that auto-enrolment contribution credits could be similar to the way the government provides state pension credits for certain individuals and could be made annually based on a notional earnings level.

If notional earnings were set at £16,240, for instance, the government would pay an auto-enrolment contribution of around £800 a year.

He also emphasised that this approach is analogous to state pension accrual and reflects the fact that individuals in these situations are adding value to society.

Reflecting on the pensions gender gap more broadly, he suggested that this could be introduced in conjunction with two, more widely supported, measures: reducing the AE earnings threshold to include more women on lower or part-time salaries and removing the lower qualifying earnings band.

Noon argued that these three key measures, if introduced, could help to "level the playing field and begin to close the chasm", stressing that "the government simply can’t ignore this inequality which is blatantly unfair to millions of women."

He continued: “It’s becoming increasingly clear that one of the primary shortcomings with the UK pensions framework is in the retirement outcomes for women, compared to those enjoyed by men.

"Evidence from the Pensions Policy Institute shows that this is largely due to the significant career breaks that many women take, as well as the higher prevalence of women working part time.

"Introducing state auto-enrolment credits, alongside other measures to extend auto-enrolment, would make a significant difference in addressing the inequality."

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