There have long been concerns of a growing pension savings gap between men and women, with female savers being woefully underprepared for retirement. Happily, latest figures suggest that, although there's still a lack of preparation, women are slowly closing the gap: Aegon has found that 7% of female respondents are on track for the retirement income they want, which although may seem a small amount, is an increase of 2% compared with April 2015.
Narrowing the divide
This finding suggests that the gap between men and women is narrowing, with women now being just 3% behind men when it comes to retirement readiness. Much of this improvement is thought to be due to the pension freedoms launched last year, which were found to create an "immediate uplift" in contribution levels: 18% of men and 15% of women are now paying more into their pension, with this being a direct result of the reforms.
This shows that the pension freedoms are having a positive influence on financial behaviour, and women in particular are benefiting. They're even becoming more realistic about their retirement age, says Aegon, and are now aiming to retire at age 64, a year later than previously. Many are becoming more realistic when it comes to income expectations, too: the gap between women's desired and likely retirement income has narrowed by £3,400 in the past six months, compared with a £50 reduction for men.
Their overall expectations are still unrealistic – women's retirement income expectation stands at £40,700 and men's at £45,800, both of which would require a savings pot of more than £1m, above the new pension lifetime allowance – but the improvement is clear.
"Women are making the biggest steps when it comes to getting on track for the retirement they aspire to," said Kate Smith of Aegon. "Since April 2015 there has been a shift as women in the UK have become more realistic about their retirement income expectations, increased their expected retirement age, and started to close the gap to their male counterparts."
However, Aegon has warned that, while pension freedoms have driven improvements in both men and women's pension contributions, they've also opened the door for fraudsters. This is becoming an increasing risk as both sexes reported receiving cold calls, but men appear particularly at risk: 23% of men and 16% of women have been offered a free pension review or pension investment opportunity, and 18% of men and 12% of women have been told that they can access their pension pot before age 55.
It isn't just cold calls, either, as 13% of men and 9% of women have received a text message offering a free pension review or pension investment opportunity, showing that pension savers need to be increasingly on their guard – yet 32% of women and 17% of men are not aware that the reforms have increased the likelihood of scams.
There's clearly still a lot of work to do to educate people about the risk of pension scams, but Kate points out that there's still a long way to go for women, too, as the "improvement is set against a backdrop of unique challenges for women". The gender pay-gap is still rife and currently stands at 19.7%, which "places women immediately on the back foot".
They often also face more disrupted working lives, be it through cutting their hours for childcare or taking time off to start a family, "which leads not only to an immediate drop in pay, but also the possibility of a longer term effect on future income and, consequently, on savings", said Kate. They've also faced a rapid rise in state pension age – something which is still a discussion point for the Government and the focus of much lobbying – so ongoing support is vital.
Kate concludes: "Industry reforms such as auto-enrolment and pension freedoms are working, and they are already having a positive effect on the saving behaviour of women in particular, with more of them ready for the retirement they want than ever before. But the challenges women face when planning their retirement remain complex, and it is vital that we continue to support those starting out or still on their savings journey."
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