Automatically enrolling staff into a pension scheme at work has, as expected, proved a boon according to government figures, however, it falls short in helping women save for their retirement.
Figures show that 9 million employees are now enrolled in a workplace scheme, and both employer and employee contributions are on the rise, but according to an online pension planning tool Pension Monster, just 32% of those logging in are women.
According to an article in Moneyfacts, ‘women's pension pots are less than half that of men's, standing at an average of £70,000 and £192,000 respectively, so this lack of engagement could have long-term consequences’.
A lack of guidance, taking on part-time jobs and career breaks for childcare can be the reason for the pension shortfall, the article speculated.
Pension Monster national accounts director Peter Bradshaw, said: "Women in particular will benefit from early and ongoing planning and guidance. Considering women will likely take career breaks for childcare, and the fact life expectancy for women has reached 83 years old, they have the most to benefit from [such support]."
Moneyfacts recommends increasing contributions to a workplace pension or investing separately in ISA for those ‘serious’ about saving for retirement.
Aon Employee Benefits consultant Sarah Hamilton feels it is an unfortunate situation that for many women, looking after their own retirement is “at the bottom of a long list of priorities”.
She said: “With the gender pay gap and the fact that women are more likely to have career breaks to care for children and ageing relatives it is clear that many women are not saving enough towards retirement. This issue is compounded by the fact that women will generally need to have bigger retirement pots than men due to higher life expectancy.”
The government’s proposals to remove the lower earnings limit for automatic enrolment will go a way to helping women in part-time or lower paid roles to start saving for retirement. However these changes are not due to come into effect until the mid-2020s, so steps are needed before then to help address this issue.
Hamilton makes the point that education is needed to encourage women to save more for their retirement.
“It starts with understanding what income they are on target to receive at retirement from the State and their own personal retirement savings so that they can identify the size of the gap. A challenge is understanding how much income is required in retirement; however, the industry has developed tools to help with this regard. There is also often a lack of understanding that tax relief reduces the cost of paying pension contributions and again tools to demonstrate this can help encourage individuals to save more.”
Hamilton concluded: “Even a relatively small increase in contributions can make a big difference over the long term, especially if an employer also pays more into their retirement pot on their behalf.”
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