The impact of the gender divide

The impact of the gender divide

On average, women who have entered pension income drawdown since the pension freedoms have retirement pots worth £118,000 – 34 per cent less than the average man’s £179,000 pot, according to research by Censuswide, published by AJ Bell on March 7.

The study – a survey of 554 respondents over 55 that have entered drawdown since April 2015, conducted between February 8 to 14 this year – found the differing income levels naturally translate into a divide over retirement expectations.

Some 62 per cent of female respondents were concerned about running out of money in retirement compared to 53 per cent of men.

Indeed, Ms Morrissey points out that research by Mercer suggests the gender pension gap is around 40 per cent, roughly double the gender pay gap.

She says: “There are many reasons for this – women tend to be paid less than men, they are also likely to work part-time and take career breaks to look after children.”

Couples should have open and honest conversations about their shared aims for retirement and how well they’re saving together.

Source—Catherine Stewart, Scottish Widows

Ms Stewart notes the 14th annual ‘Women and Retirement Report’ published by Scottish Widows in 2018 showed 54 percent of women were saving adequately for retirement, compared to 56 per cent of men. 

She says: “For younger women, the fear of financial hardship is clearly discouraging many from saving into pensions, leaving those most financially vulnerable at an even greater disadvantage.”

Playing catch-up

Ms Lord says the key is making sure women are saving and reviewing their finances on a regular basis.

She says: “It is essential to include saving as part of the monthly budget and make sure funds are set aside for the future.”

But to really close the gap, women must prioritise their pensions early in their career, and get maximum benefit from employer contributions, tax relief and investment performance, suggests Ms Morrissey.

She adds: “They should also make sure they plug any gaps in state provision by ensuring they continue to receive National Insurance credits when they are at home caring for children.”

Ms Stewart also suggests “tracking down any older pensions they may have and consolidating them may be an option,” as well as “paying a little extra before, during or after taking extended leave, can go some way to mitigating the impact to retirement savings”.

She adds: “Couples should have open and honest conversations about their shared aims for retirement and how well they’re saving together.

“In addition, seeking legal advice is crucial to understand the legalities of what happens to pension pots during divorce proceedings and what pension offsetting is.”

Source - Victoria Ticha is a features writer for Financial Adviser and FTAdviser

Published 01/04/2019

8 Million think they will never retire

PEOPLE SAVING ADEQUATELY REACHES RECORD HIGH – YET 8 MILLION THINK THEY’LL NEVER RETIRE 

The number of people saving enough for a comfortable retirement has hit its highest ever level, with almost three in five Brits (59%) now saving adequately for the future*. This is a significant improvement from the 55% proportion recorded 12 months ago, suggesting April’s auto enrolment step-up had an immediate positive impact on saving habits. It’s not all good news, however. The 15th annual Scottish Widows Retirement Report shows that the proportion of people not saving at all for later life remains static at 17%. Meanwhile, more than a fifth of UK adults (22%) – equating to almost eight million people – expect they’ll never be able to afford to retire. Who are the never-retirers? Those who think they’ll never be able to retire are more likely to have no pension savings at all (35% of this group, versus 26% national average), with over half (51%) expecting to rely solely on the State Pension in later life. 

In fact, never-retirers are those who are already financially vulnerable. They have an average income of £21,500 a year – significantly below the UK average salary of £27,396 – and are much more likely to have faced a financial emergency in the past, from an unexpected bill to a sudden drop in income (86% of this group, versus 67% national average). They are understandably anxious about making ends meet: 85% of ‘never-retirers’ are concerned about running out of money in retirement, compared to 53% of the wider population, and almost three in five (63%) are worried they will have to work when they are no longer fit and healthy. 

The young feel the benefit of auto-enrolment, but still aren’t saving enough The number of under-30s not saving for retirement has fallen dramatically thanks to auto enrolment: almost half a million under-30s started saving for the first time in the last two years, with four in 10 (40%) 22-29-year-olds now saving adequately. This is a significant uplift from the 30% recorded in 2017. This still, however, leaves three in five young people saving below the recommended level for a comfortable retirement, with 14% of 22-29-year-olds not saving anything. 15 years of progress Scottish Widows’ research highlights progress over the last 15 years. The proportion of people who are not in a defined benefit scheme and saving something for retirement has risen from an average of just 43% in 2007, to 55% today. 

The biggest gains have been among younger people, with an 18% rise in 22 to 29-year-olds saying that they save for later life. Peter Glancy, Head of Policy at Scottish Widows, said: “One in five people say they’ll never be able to retire. With no further step-ups in auto-enrolment contributions planned, this is a timely reminder that bold action must be taken to ensure no-one has to face the spectre of poverty in their later years. “While the past 15 years have proved that things have been changed for the better, auto-enrolment alone won’t avert a pension crisis in the UK. 

Government and industry need to take the next step together and stop pretending the long term savings challenge can be solved in isolation.” 

Source: Scottish Widows