Shorter working careers make the challenge of retirement saving even greater for women, as Sophie Ballard explains.
Many people find it difficult to save enough for retirement. But competing responsibilities and continual income differentials add extra dimensions to that challenge for many women. The proportion of women in the UK saving adequately for retirement remains well below the levels of the male population.
The activities of the Women Against State Pension Inequality group and recent Citizens Advice Bureau research on women missing out on workplace pensions have thrust women’s retirement issues into the limelight.
But despite their work and the additional flexibility open to both sexes through pension freedom, the gap between men and women’s retirement savings remains ever prevalent.
According to Scottish Widows, half of women are saving adequately for retirement compared to 60% of men.
Delayed retirement
Research from State Street Global Advisors shows that 36% of UK women are concerned about reaching their retirement goals. In addition, more than two-fifths (41%) said they intend to work for longer in full-time roles to fund their retirement. This is part of a general shift to later retirement, as an extended work life is on the cards for 55% of people in the UK.
The research also found only a quarter (25%) of women are confident they will have their desired income at retirement, with other financial pressures often taking priority.
For example, 58% of UK women admitted to feeling stressed about their financial situation, with 28% prioritising household necessities over savings and more than a fifth stating they had lost control of their finances.
Milestones such as maternity leave, raising children or caring for a relative contribute to women having shorter working careers, meaning less opportunity to earn and convert some of those earnings into pension savings.
Only 41% of women know what their defined contribution pension pot savings are invested in compared to 52% of men. These findings indicate that when it comes to retirement saving, people want uncomplicated and intuitive solutions, preferring to leave complex investment decisions to trusted experts so they can focus on the two aspects they can control: how much to save and when to retire.
Last month, the All Party Parliamentary Group on Women and Work called for companies to put better programmes in place for “returning women”.
It is essential these programmes address women’s retirement needs, particularly as career breaks are often within the optimum earning period between the ages of 30 and 45, when savings potential is at its highest. These programmes will hopefully help bring women closer to their retirement goals.
Boosting engagement
There are ways for pension providers and employers to optimise women’s engagement with pension plans, including:
• Encourage women to start saving into their pensions early to make up for any missed contributions
• Engage women at key points in their lives, such as during maternity leave or a career break, and explain the impact it will have on their pension
• Improve communication through face-to-face and personal interaction (this could include hosting savings bootcamps, which is a common practice in the US)
• Auto-escalation schemes that encourage a savings increase to make up for missed contributions
ϖ Student loan payments or childcare voucher payments defaulting into pension payments once they are no longer required
• Provide greater support to improve financial knowledge and confidence.
The challenge for the industry is to come up with easily accessible, flexible vehicles that allow people to save for a variety of differing retirement needs.
In addition to industry guidance, solutions such as auto-escalation of contributions, increased contributions for set periods of time on return from career breaks and well-designed, diversified investment options also need to be considered.
Addressing women’s retirement needs requires a multi-dimensional approach at all levels, from government policy, pension providers, employers and women themselves.
Sophie Ballard is senior defined contribution relationship manager at State Street Global Advisors
The post Women and pensions: Closing the gender gap appeared first on Retirement Planner.