In the past, women have trailed behind their male counterparts when it comes to retirement saving. But now, according to the latest research from Scottish Widows' Women and Retirement Report, the gap has started to close with the number of women saving adequately for retirement rising to a four-year high.
The research found that half (50%) of the UK's female population are now putting enough of their cash aside to provide for retirement – a 10% leap from the number of women doing so in 2013. This marks the first increase since 2011, which suggests that recent pension reforms, such as auto-enrolment, have successfully bolstered the number of women saving for their work-free years.
The gap between male and female savers now stands at just 5%, with 55% of men saving sufficiently. This is a significant reduction from the 9% gap that was recorded in 2013, when 49% of men were saving adequately compared with 40% of women. The gap between the sexes is even smaller among the 50-64 age group, with 60% of women and 62% of men preparing adequately for retirement, leaving a gap of just 2%. In this age group, women tend to save around 10.5% of their earnings compared with men, who save around 11.2%. Both of these totals are close to the widely recommended savings levels of 12%.
Perhaps tellingly, reforms such as automatic enrolment have been met with widespread approval, with 62% of women viewing the measure as a positive one. Thanks to this innovation, women are now saving an average of£42.51 per month into their workplace pension, a figure that is only slightly lower than the men's average of £49.27.
"Women have historically lagged behind men in retirement savings but the recent pensions changes are giving women new opportunities to build a more comfortable retirement," commented Lynn Graves of Scottish Widows. "While it is still early days, the recent reforms are clearly helping more women to put away more for retirement, and to recognise the importance of starting this as early as possible."
While these results are indeed indicating positive changes in women's attitudes and behaviours towards retirement saving, there are still a few clouds on the horizon.
Although the gap between men and women's savings habits has narrowed, the fact remains that a gap still exists. In Scottish Widows' research, it was found that women typically saved £206 a month for retirement while men saved £298. While this may seem like a small difference initially, over the long-term this savings gap can add up to a sizeable disparity. In fact, it could result in an overall difference of £142,000 in terms of the total amount saved from the age of 22 to 68. That's a big chunk of retirement income that women will not be benefitting from.
There are also a large number of women who do not save into a company pension, opening them up to the possibility of reaching retirement without the necessary funds. The research found that while there is now a record 14.4 million women employed in the UK, only 29% of them pay into their work's pension scheme.
This, Lynn Graves argues, is the result of women taking career breaks and moving into part-time work. While automatic enrolment will help to decrease this figure, it will not cure the ill completely. "We must not be complacent," stated Lynn. "[We] need to explore how saving for retirement outside of paid employment can be made easier."
There is undoubtedly a gap between the retirement savings of men and women, but it also appears that there is a significant knowledge gap, too. When questioned by Scottish Widows, more than one in 10 women (11%) admitted that they have never seriously thought about paying into a pension, and a rather worrying three in 10 said that they never will.
The research also identified a lack of awareness among women, with only 15% of female respondents saying that they fully understood pensions. Despite this, only one in 10 women use a financial adviser, and of those, only 37% had discussed pensions with them. Instead, 22% said that they would be as likely to get advice from friends and family as they would from an independent financial adviser (IFA).
This suggests that not only do a large number of women not feel confident about their pensions knowledge, but many are also unsure about the best places to seek advice from – something that could really impact their retirement options and the amount of income they can expect.
In light of this, Lynn Graves said: "We've found that women are less confident than men about the world of pensions. There is a role for Government, employers and financial institutions to do more to promote pensions education, providing targeted material and advice to women."
If you're worried about your retirement income, or you have never really thought about it before, it's never too late to start getting advice and building up a pension fund. An IFA is the best place to get advice on how to secure the best income for your retirement, so they should ideally be your first port of call. Planning your finances will give you a confidence boost and will help you to reach your retirement savings goals.
Concentrating on your savings should also be at the forefront of your mind. If you're not already enrolled in your company's pension, sign up now! You can benefit from tax-free savings and your employer will also make contributions to your pot – it's a win-win situation. Putting money into a good savings account will also help you to build up a nice retirement nest egg. You can find the best place to stash your spare cash by checking out our top savings deals.
Finally, if you want to start exploring your retirement options, take a look at our annuity planner.
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