The gender savings gap has long been a concern of retirement experts and individuals alike, and unfortunately, it looks as though it's still a key issue, as new research from Aegon UK highlights.
The figures show that just 10% of women are on track for the retirement income they aspire to, and although this has doubled from the 5% who were on track in April 2015 – before the pension freedoms were introduced – it remains well below the male average of 14%.
This shows that, despite the gap having narrowed, women still have a way to go to reach the same level of retirement readiness as their male counterparts, and their expectations can often fall far short of reality.
Indeed, the figures went on to reveal that the savings gap can be clearly highlighted when looking at average pot sizes, with women having an average of just £20,000 saved in pensions, less than half the £52,500 saved by men. This could be because men contribute an average of £85 more a month to their pension than women – women save £170 per month, but this means that they set aside £1,020 less than men each year – but it could also be due to a lack of active management.
When was the last time you checked the performance of your pension? Chances are, it was a while ago, particularly if you're of the fairer sex: just 21% of women have checked the performance of their pension in the last six months compared with 27% of men, and only 19% have taken steps to review their plans for retirement, while 25% of men have done just that.
There's some comfort to be taken from the fact that last year's pension reforms appear to be having the desired effect, with women saving 14% more into their pension as a direct result of the freedoms. Men, however, are saving 16% more, so there's clearly more work to be done. Despite all this, women currently plan to retire a year earlier than men, at age 63, but given the figures, it may not be that simple.
"Despite encouraging signs for women, the truth is that their expectations are simply not lining up with reality," said Kate Smith, head of Pensions at Aegon. "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, [and this] target retirement age comes against a backdrop of an increasing state pension age for women."
The state pension age – the age at which you'll be able to receive the state pension – is gradually increasing, and over the next four years it'll rise to 65 for both women and men. Given that women are planning to retire two years earlier than that, they'll need to rely on their own pension to provide an income before the state pension kicks in – unless they've got other income in the form of a partner's salary or savings, for example - and based on average figures, that pot may be insufficient to meet their needs.
"While the freedoms have certainly had a positive impact on 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," added Kate.
She said it was vital that the Government and industry continue to help make pension saving a priority, and that although auto-enrolment is supporting women's savings levels, "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".
Start closing the gap
The savings gap in itself is worrying, but it's particularly concerning that only 10% of women – and 14% of men – are on track for the retirement they aspire to. It's not only important for women to begin closing the gender savings gap, but for everyone to close the gap between expectation and reality, and hopefully get on the right path to a comfortable retirement.
But how can that be done? The key thing is to start saving as much as possible from as early as you can, ideally in a workplace pension – you wouldn't want to miss out on tax relief and Government contributions, after all – but don't overlook private pensions or more general long-term savings pots (such as ISAs) either.
Make sure to keep on top of things and regularly check the performance of your pension and any other savings you have, and if they're not up to scratch, consider investing your pension in different funds (contact a financial adviser if you're unsure) or switching your cash savings to one of the top accounts on the market.
If you're getting closer to retirement you may want to use the various online tools available to see whether or not you're on track, because if you're not, there could still be time to do something about it. Above all, be proactive, and hopefully both the gender gap and expectation gap will continue to narrow.
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