Women's pension saving reaches an "all-time low"
The number of women saving adequately for retirement is at an all-time low, lagging well behind men, Scottish Widows has found.
In its annual Women and Pensions Report, the firm found that just 40% of women are preparing adequately for their retirement - a drop from 42% last year and 50% in 2011. This compares to 49% of men who are preparing adequately for later life.
The survey of over 5,000 people found that this year the pensions saving gender gap has now reached £1,000 a year, with women saving an average of £182 a month compared to £260 for men. Just over a third (37%) of women have no pension at all, compared to just over a quarter (27%) of men.
Lynn Graves, head of business development at Scottish Widows' corporate pensions department, said : "It is worrying to see that women are continuing to lag behind men in retirement savings. This growing gender gap in retirement savings means that women are facing an ever increasing shortfall when it comes to retiring and must act now to ensure they will not be left exposed in later life."
The firm said it had uncovered a number of lifestyle reasons for why women fail to keep pace with men throughout their lives.
Women in their 20s are tied down by short-term financial pressures and instead of saving for retirement prioritise living expenses, paying off debt, travel, and saving for a property.
Only 50% of women in their 30s work full-time compared with 81% of men of the same age, reducing their ability to contribute to a pension.
Women in their 40s prioritise supporting their children over retirement saving, while paying off debt is the key focus of those in their 50s. Scottish Widows found that women in their 50s still owe an average amount of £11,400, slightly higher than the £11,000 of average debt women in their 40s have.
Graves added: "Of particular concern is the number of women in their 40s who are planning to rely on their partner to help support them in retirement, but are unsure of what their pension provision would be were they to separate. We should encourage these individuals to take full responsibility for their financial independence."
What can be done?
Tom McPhail, Head of Pensions Research, Hargreaves Lansdown, said there is more to be done to help women enjoy a comparable standard of retirement provision to men. He explained: "The government can raise the Universal Pension Allowance, which has been stuck at £3,600 since 2001 and is falling woefully behind against rising prices. This is an important allowance widely used by non-earning spouses, those taking career breaks and children. Had this increased by RPI inflation it would now be over £5,289.
"Employers should be encouraged to talk to their employees about the benefits of auto-enrolment, to encourage as many lower earners as possible to opt-in to their workplace scheme and take advantage of their employer's contributions."
Replaced as the official measure of inflation by the consumer prices index (CPI) in December 2003. Both the Retail Price Index and CPI are attempts to estimate inflation in the UK, but they come up with different values because there are slight differences in what goods and services they cover, and how they are calculated. Unlike the CPI, the RPI includes a measure of housing costs, such as mortgage interest payments, council tax, house depreciation and buildings insurance, so changes in the interest rates affect the RPI. If interest rates are cut, it will reduce mortgage interest payments, so the RPI will fall but not the CPI. The RPI is sometimes referred to as the “headline” rate of inflation and the CPI as the “underlying” rate.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
In exchange for any lump sum – usually your pension fund – an annuity is “bought” from an insurance company and provides an income for life. When you die, the income stops. Annuity rates fluctuate daily and depend on your sex (although from 21 December 2012 insurers will no longer be able to use gender as a factor when calculating annuities), age, health and a number of other factors, so you have to pick the right one and, once bought, its terms cannot be altered, so seek financial advice.