Women continue to save significantly less than men as the current system is geared towards male working patterns and behaviours and fails to recognise the unique circumstances that impact women’s planning for retirement.
Auto-enrolment, changes to the state pension and the proposed reforms to pensions and savings announced in the Budget will help many more people to prepare for retirement and give them greater flexibility in planning their retirement income. These reforms will not, however, tackle the additional barriers women face.
New research from Scottish Widows shows that while a woman’s average savings pot has dropped by £260 over the past twelve months, men have in the same time period boosted theirs by £200. This paints a worrying picture of the continual widening of the gap in savings between genders.
The research found that 22% of women now have no savings at all, compared with 15% of men, and those women who do save have an average of just £9,300 set aside for the future compared with £11,100 for their male counterparts.
Scottish Widows has found that even when men and women save the same over a 40 year career period, men can end up between £33,000 and £89,000 better off due to the different ways in which men and women choose to save, and how the system rewards and incentivises this behaviour.
21% of women save exclusively for the short term, compared to 18% of men, and when it comes to saving exclusively for the long term, this trend is reversed: 21% of men say they are saving for the long term, compared to just 14% of women. This suggests that women are more focussed on covering short-term and day-to-day living costs, particularly as 17% of women, compared to 12% of men, say the reason they are not saving for the long term as they never know when they might need their money.
Women were also found to be more risk averse, thereby limiting the potential for growth in alternative investment vehicles. More than a third of men (34%) compared with only 28% of women say they invest in a stocks and shares as they have better return than cash investments, and 10% of men, versus 5% of women, say they preferred their pension to be invested to produce the best possible returns, despite the risks of losing out if stock markets fell.
This behaviour is a factor that can contribute to the £33,000 and £89,000 difference in savings between men and women over a 40 year career period.
Competing pressures of family and working life mean more women (one in five) than men (8%) work part-time and take significant periods out of the workplace for maternity leave and caring responsibilities. Many women either have less access to workplace pensions or end up saving less into them over time than men. Scottish Widows has calculated that a typical career break could reduce a woman’s pension pot by over £28,000.
This problem is exacerbated by the gender pay gap for women while they are in work. Not only does women’s pay still fall behind that of their male counterparts in many industries, but they also see their average earnings peak in their thirties, while men continue to see their pay climb until they turn 50.
Scottish Widows has begun the process of engaging with industry, advisory groups and policymakers, to look at ways to overcome the barriers women face in long-term saving and reduce the biases in the system.
Jackie Leiper, Director of Employer Relationships at Scottish Widows, said:
“There is no ‘one size fits all’ solution to help women overcome the barriers to saving for their future. It’s therefore crucial that industry, advisory groups and policymakers work together to improve educational resources and access to information and advice that is designed to resonate with a female audience and is delivered at key trigger points.
“Some simple structural changes could also help. Widening the scope for paying into a pension outside of paid employment and allowing couples to plan for retirement together would give women more flexibility in building up their own pension savings. In addition to this, improving the tax incentives for ISAs would encourage women to plan for the longer term, while still accommodating their preference for some ‘rainy day’ access to savings.
