Pensions - Articles - Gender Pay Gap Stifles Record Female Pension Pots

 The seventh annual Scottish Widows Women and Pensions Report 2011 reveals that the number of women saving
 adequately for their retirement has reached the highest level in the report’s history[1], with 50 percent of women
 saving adequately for retirement, compared with 43 percent in 2010. Yet despite this new high, men are saving as
 much as £700 more than women each year due to a disparity in income levels.  

 
 The new findings show that when women are saving they put aside on average 12.9 percent of their income,
 including any employer pension contributions. Men by comparison are saving less, 12.6 percent of their income.
 However, men are able to save significantly more for retirement as they typically earn higher salaries, £28,091 for
 men compared to £22,490 for women, a difference of nearly 20 percent.[2] Many women are saving nothing at all – 23 percent, compared with 17 percent of men.  

 
 Based on a sample of 5,200 adults, the report found that the gap between the number of men and women saving for retirement is closing, now at just 3percentage points, down from 9 percentage points in 2010. However, we are
 seeing a growing disparity between the ages with 56 percent of women aged over 51 saving adequately for
 retirement, compared to 46 percent of women aged between 30 - 50.

 Ian Naismith, Head of Pensions Market Development at Scottish Widows, said: “It is encouraging to see a positive step change in the number of women saving adequately for retirement, especially given the challenging economic climate, but the gender gap still exists.  

 
 “Many women will spend a proportion of their career working part-time and will also face challenges of lower pay,
 higher childcare cost and growing unemployment, so despite their best efforts this will have a knock on effect on
 their financial decisions and saving for retirement.”  

 
 Gender gap is closing but savings need to increase  
 The good news is the number of women saving adequately for retirement has significantly increased in 2011. The
 Scottish Widows Pensions Index, which shows the number of women saving adequately for retirement, has
 increased by seven percentage points compared with 2010. There was just a one percentage point increase for men.  

 
 The average man who is preparing for retirement saves £4,158 a year, compared to £3,457 a year for women, both
 figures include any employer contributions into their pensions.  71 percent of women say they can’t afford to save
 long term, compared to 60 percent of men.

 
 Generation gap is widening
 This year we have seen a growing generation gap between younger and older women. On a positive note, the
 number of older women saving adequately for retirement has increased by 18 percentage points over the last 12
 months, while 38 percent of women saved adequately for retirement in 2010. However, the 30-50 age group is now
 lagging behind by 10 percent.  

 
 Younger women have more faith in their cash savings (including ISAs) to help fund their retirement, are not taking
 action. Only 19 percent of women under 30 are currently investing in cash savings compared to 40 percent of those
 over the age of 50. On the flip side, older women use more equity-backed investments compared to younger
 women, or even their male counterparts.  

 Financial independence
 Younger women understand that the government won’t be able to cover their retirement, with only 12 percent of
 women under the age of 30 assuming that it will contribute most of the income in retirement, compared with 28
 percent of women over 50. This highlights the changing attitudes towards financial independence amongst younger
 women.

 
 Auto-enrolment
 Early signs show that the NEST pension scheme will encourage savings amongst women, particularly younger
 women, which is a key target for automatic enrolment reforms. 43 percent of younger women believe they will
 remain in a pension scheme after being automatically enrolled, which is significantly higher compared with older
 women (33 percent).  

 
 Ian Naismith, continued: “The changes that we are seeing in women’s retirement saving habits could be a result of a change in attitudes towards their savings and retirement, whereby they are less willing to rely on other family
 members, or think they understand their current situation more.  

 
 ”However, more that needs to be done to bring them up to reach the same savings levels as men. Women often give higher financial priority to family as opposed to their pension.  While this is laudable, they need to ensure that they give enough priority to providing for their own retirements.  It is also important that both partners in a couple have pension provision of their own.   Women may also need to adopt a more adventurous approach to saving to
 maximise the growth prospects, though they need to be able to accept the possibility of short-term losses.”