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Women losing out on pension saving

Just 47% of women are saving adequately for retirement compared with 59% of men.


Just 47% of women are saving adequately for retirement compared with 59% of men.  The latest 2009 survey of Women and Pensions shows that the gender gap has widened 3% since last year, in spite of an increase across the board in pension saving. 

The survey of over 5,000 individuals carried out by YouGov on behalf of Scottish Widows shows, unsurprisingly, some 26% of women over the age of 30 and earning more than £10,000 a year are saving nothing for retirement, compared with 15% of men – an increase on the 2008 figures.

Job insecurity is a big factor with the number of women who believe that fear of losing their job has prevented them from saving increasing from 6% last year to 12% this year.  And, of course, career breaks to look after children are major factors for women saving for retirement with 24% of women with children having had to stop some pension savings due to having children.  Only a third of young women (35%) think the state pension will help them have a reasonable standard of living in retirement.

While fewer women will be directly hit by the demise of final salary pension schemes (only 34% of women with a private pension have a defined benefit, final salary linked scheme compared to 41% of men), they may be indirectly hit as one third of men (32%) have a dependent spouse and this rises to 44% of men over the age of 50. 

Women are more conscious than men that they need to save for retirement - 28% of women with a pension and not retired are aware they need to save more compared to 24% of men.  But this isn’t translating in to increased savings.  In 2008, 48% of women aged 18-29 claimed that they were likely to save more towards retirement at some point over the next year, but only 22% have actually done so.  Overall, 31% of women in 2008 said they intended to save more but only around one in six (16%) actually did.

Not only are women not saving enough for retirement but they also have more debt than men.  On average women have around £1,000 worth of extra debt than men - women have £12,156 in non-mortgage debt while men have £11,080 on average.  

But probably the biggest problem of all, according to Scottish Widows, is that women are in denial over retirement – some 44% of women with no private pension believe they will never contribute to a private pension.  However, this conclusion could be wrong because the survey also shows that women take a shorter term view of saving than men and could, therefore, be reluctant to tie up money in a pension scheme where it is inaccessible until they retire.  Women who are the prime carers of children are all too aware that money may be required unexpectedly – long before retirement. 

Moreover, with the limit of saving in ISA now £10,200 a year, most families would arguably be better off saving in an ISA where money can be accessed rather than a pension.  In addition, the tax free roll up of ISA investment and the ability to take tax free income is arguably equally valuable as the tax relief on pension contributions.  Women could be saving – but not in pension schemes.

The trouble with all these surveys is that because they are sponsored largely by life companies, they make the assumption that the only way to save for retirement is through a pension plan.  This is definitely not the case.  Many families choose to ‘save’ for retirement by buying the most expensive house they can afford – where at least they get the benefit of living in a decent home - and then trading down at retirement.   

In addition, many families cannot afford to save at all – which largely explains why half the population (mostly the lower-income half) have no pension savings at all.  As we showed a couple of weeks ago on Citywire,  a single person with an income of £30,000 a year has less than £10,000 a year to live on after paying tax, National Insurace, Council Tax, mortgage or rental costs of £100 a week and household utilities bills.  

Only the relatively wealthy can afford to save the recommended 12% to 15% of income throughout their lifetime to provide a pension of two-thirds final salary at retirement. Scottish Widows’ facts from the survey bear this out – women earn less, have career breaks and often work part time, and therefore are able to save less.    

On average women who are members of defined contribution (money purchase) employer-arranged schemes are contributing nearly £90 a month compared to men who save nearly £168. Of those saving in a private pension scheme, women on average are contributing nearly £184 a month compared with men contributing nearly £331. 

Women also have fewer opportunities to save with only a third of women having access to a defined benefit (final salary linked) scheme compared with 41% of men.  And because men earn more around a quarter of men with a private pension scheme are contributing to an individual personal pension compared with just 14% of women – this has fallen from 17% in 2008.

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