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Published: 13/11/2017
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Approaching retirement can be an incredibly exciting time, but if you don't have the right pension provision in place, it can be daunting as well. Unfortunately, it seems that many pre-retirees are concerned about their post-work finances, with many believing that they'll never have it as good as those already retired.

Low expectations

That's according to research from Prudential, which revealed that pension savers in their final years of work are concerned that they won't be able to match the living standards of current retirees. Indeed, half (50%) of those within 10 years of their planned retirement date admit to being jealous of the finances of those who have already retired, while 54% believe they will be worse off when their time comes to give up work.

As such, 63% say the best advice they could give to younger workers is to save as much as they can from as early as possible, with 34% now regretting that they didn't start saving into a pension earlier in their own working life; given that workplace pensions
offer the benefits of Government tax relief and employer contributions, it's little wonder they're so prized. Another 33% simply wish they'd saved more for their retirement, perhaps by utilising other savings vehicles such as ISAs.

Unfortunately, many haven't taken their own advice, as while 27% of those who are within 10 years of retirement have been saving into a pension since they started work, 16% admit they're not saving into a pension at all, highlighting the difficulties that many pre-retirees face. As a result, 13% admit to having previously been unrealistic about the age at which they'll be able to afford to retire, with many having to stay in the workplace for longer than they may have hoped.

Prudential's retirement expert Stan Russell points out that the decline of generous final salary pension schemes means that "a degree of retirement envy among those still at work is understandable," but it isn't all bad news, with 40% believing they'll be as financially comfortable as today's pensioners, while 6% believe they'll be better off, so some are clearly still confident about their retirement finances.

Yet there may be a bit of a gender divide when it comes to this, with additional research from Close Brothers and the Pensions and Lifetime Savings Association (PLSA) showing that the gender savings gap isn't narrowing to any extent, which means women could have it even harder in retirement.

Gender gap

The research shows that more than half (51%) of female employees admit to feeling financially unprepared for retirement, compared to just 35% of male workers. In a similar vein, only 23% of female employees feel well prepared for retirement, compared with 36% of men, highlighting the continued gender savings gap and the difficulties many women could face when they come to retire.

This is further evidenced by the finding that the average amount in a woman's workplace pension is less than half that of their male colleagues, at £53,000 vs. £120,000, and they're also twice as likely to have less than £5,000 in workplace savings compared with their male counterparts (29% vs 15%).

This can also be seen in terms of non-workplace savings, as while around a third of male employees have less than £5,000 in savings, this rises to 41% among women. Not only that, but female employees are also saving nearly a quarter less than men in non-pension savings accounts, squirrelling away £221 per month vs. men's £305, which adds up to a difference of over £1,000 a year (£2,652 compared with £3,660).

Much of this could be driven by the continued and significant pay divide, with the mean annual salary of women being nearly 30% less than that for men, at £27,379 and £37,655 respectively. As a result, 42% of female workers don't think they earn enough in salary and workplace benefits to save, a figure that falls to 27% of men, which is surely fuelling the lack of savings among women.

However, another factor impacting savings behaviour could be a lack of financial confidence, with just 36% of women feeling confident about choosing the right financial product compared with 45% of men, highlighting the potential impact that financial education could have when it comes to savings activity.

"The savings crisis is thrown into stark relief when looked at under the lens of gender imbalance," commented Jeanette Makings, head of Financial Education at Close Brothers. "Women are not only earning less and therefore saving less, but are significantly less confident about the savings options available and how to choose what's best for them. Financial educators, like employers, are better placed to offer guidance and information, but they need to consider the diverse needs of their audience."

What can you do?

If you're approaching retirement and want to stand the best possible chance of living comfortably, the combination of saving and financial education is key. This is particularly the case if you're yet to begin saving, but as Stan Russell adds, all is not lost:

"It is important to remember that for most people it isn't too late to take action and make a real difference to their quality of life when the time comes to stop work. Even later in their working life, most people should benefit from saving as much as possible into their pensions, and also ensuring the National Insurance contributions they have made are sufficient to guarantee them the State Pension."

Start the process by signing up to your workplace pension scheme if you haven't already done so – if your employer doesn't offer one yet, automatic enrolment means they soon will – and start saving as much as you can. Make sure to seek the right guidance, ideally by having a consultation with an independent financial adviser, to ensure you're on the right track, and hopefully you won't need to worry about struggling in retirement.


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