Gender gap in pension savings narrow, as women benefit from Workplace Pension changes
by Alexander Beard, on Feb 9, 2015 7:17:40 AM
The number of women saving adequately for retirement has shifted from a record low to a four-year high in the last 12 months, according to Scottish Widows’ annual Women and Retirement Report. Half of the UK female population is now preparing adequately – the first increase recorded since 2011 – a leap of 10 percentage points from 40 to 50 in the past year following the significant changes in pensions regulations such as the introduction of automatic enrolment.
Scottish Widows’ latest report also found that the gender gap is closing, with a nine percentage point gap between women and men in 2013 now reduced to five. Women aged 50-64 are keeping up with men in the same age group with 60% and 62% respectively preparing adequately. In the 50-64 age group, average savings for women are 10.5% of earnings, compared to 11.2% for men – approaching 12%, the savings ratio recommended by Scottish Widows as the minimum necessary for a comfortable retirement.
Saving adequately refers to those who are over 30, earning at least £10,000 a year and saving at least 12% of their income or expecting their main retirement income to come from a defined benefits pension. The report suggests automatic enrolment has been met with widespread approval (62%) among working women of all ages. On average, women who are auto-enrolled are saving an average of £42.51 a month into their workplace pensions, compared to £49.27 for men.
Lynn Graves, Retirement Expert at Scottish Widows, said:
“Women have historically lagged behind men in retirement savings but the recent pensions changes are giving women new opportunities to build a more comfortable retirement. Whilst it is still early days, the recent reforms are clearly helping more women to put away more for their retirement, and to recognise the importance of starting this as early as possible.
A record 14.4million women are now employed in the UK, an increase of over half a million women over the past two years and the highest since records began, but just 29% of them are currently part of a company pension scheme, with a greater tendency towards career breaks and part-time working largely responsible for this. The continued rollout of automatic enrolment should see this figure continue to increase, however we must not be complacent, and need to explore how saving for retirement outside of paid employment can also be made easier.”
Despite the marked improvement overall, there is still a gap between how much women and men are putting away for retirement each month. Women typically save £206 a month for retirement, which is approximately 30% less than men who are saving an average of £298 each month. This creates an overall gender gap of £142,000 in terms of the total amount saved for retirement over a working lifetime from age 22 to age 68. More than one in 10 women (11%) still say they have never thought seriously about paying into a pension and around three in 10 say they never will.
The report also found that although overall savings levels are increasing amongst women, there still exists a significant awareness gap, with only 15% of women saying that they fully understand pensions. Only one in 10 women use an independent financial adviser, and just 37% of those have discussed pensions. One in five women (22%) said they would be as likely to go to friends and family for information on pensions as they would be to seek advice from an IFA.
Lynn Graves added:
“We’ve found that women are less confident, but not necessarily less informed than men about the world of pensions. There is a role for government, employers and financial institutions to do more to promote pensions education, providing targeted material and advice for women. We are focused on supporting people to make more conscious decisions about how they manage their money before, during and after retirement.”