• 10% of women are ready for retirement, in comparison to 14% of men
• 14% of women are saving more into their pension as a direct result of pension freedoms
• Women hope to retire a year earlier than men at age 63
• However, women face annual savings gap of £1,020 compared to men
In April 2015, the Government introduced new pension rules which give people with defined contribution pensions new opportunities to access their pension savings and use this money in the way they choose from age 55. As a direct result of these new freedoms, women are saving 14% more into their pension and 16% of men are contributing more to their pension pots. Other initiatives such as workplace auto-enrolment may also have helped fuel this 5% increase in the number of women who are on track for the retirement they want.
Hand in hand with these reforms, steps have been taken by Government to equalise women’s state pension age. This means that women won’t be able to access their state pension until age 65 by 5 April 2020**. However, women currently plan to retire age 63, a year earlier than men plan to.
On average women have £20,000 saved in pensions, under half the £52,500 that men living in the UK have saved. This savings gap is compounded by the fact that men contribute an average of £85 more a month to their pension than women, who save a monthly sum of £170. Over the course of the year, this means women are saving £1,020 less than men.
Women are also falling behind their male counterparts on how regularly they are reviewing the performance of their savings and taking steps to review their plans for retirement. Just 21% of women have checked the performance of their pension within the last six months, while only 19% have taken actual steps to review their plans for retirement. This is well below the average engagement levels of men, of whom 27% have checked the performance of their pension in the last six months and 25% have taken steps to review their plans.
Kate Smith, Head of Pensions at Aegon said: “Despite encouraging signs for women, the truth is that their expectations are simply not lining up with reality. The value of women’s pension pots is well under half of their male counterparts but they currently expect to retire aged 63, a year earlier than men. This target retirement age comes against a backdrop of an increasing state pension age for women. Over the next four years women’s state pension age will be increased to 65. With this in mind, they’ll need to fund an additional two years of retirement from an inadequate pension pot before the state pension kicks in, unless other income, such as their partner’s salary or retirement savings is available.
“While the freedoms have certainly had a positive impact on the women’s savings behaviour, with double the proportion on track for retirement since last year, the challenges women face when planning their retirement remain complex, and it’s vital that the government and industry continue to help make pension saving a priority.
“Auto-enrolment will support women’s savings levels, as the mandatory contribution levels increase, but more must be done to ensure that women, who often face a disrupted working life, are given the support to help them save more and bring their retirement expectations in line with reality, and provide the retirement they want.”
Kate’s tips:
1. Find out your state pension age https://www.gov.uk/state-pension-age and how much you are going to get https://www.gov.uk/check-state-pension
2. You may have built up a number of pension pots with different employers. Find out how much you have saved in all your pension pots and consider consolidation. You can use the Pension Tracing service to help with this https://www.gov.uk/find-pension-contact-details
3. Use online tools such as those on Retiready to work out how much more you need to save to achieve your aspired retirement income and what you can afford to save for retirement.
4. Delaying your retirement and working longer will help you build up a bigger pension pot and help you to achieve your retirement goals.
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