When it comes to managing money, some women may feel they are not as confident as their male counterparts. In fact, new findings from Legal & General (L&G) reveal women are 33% more likely than men to say they do not understand how their pension works.
This lack of financial confidence could help explain why women are less likely to have engaged with key financial products, with further research showing they are 38% less likely than men to have a stocks-and-shares Isa, and 32% less likely to have a private pension. This makes for really worrying reading, as it could be seriously impacting their retirement.
Mind the gender pay gap
A big contributing factor to the gender pensions gap is the significant gender pay gap. According to L&G, by the age of 27, women are already earning a huge £10,000 less than men of the same age. Matters are only made worse by other factors that could impact women’s pension savings, such as being less likely to hold senior leadership positions, resulting in smaller pensions, as well as being more likely to work part-time or on reduced hours. It’s also more common for women to take career breaks for childcare, as an unpaid carer, or to need time off work for medical reasons, such as menopause.
Katharine Photiou, managing director of workplace savings at L&G, said: “The combination of these responsibilities and challenges still place women at a significant disadvantage in terms of being able to reach similar savings level as men. In addition, women often self-identify as having lower confidence when it comes to savings and investments, presenting another potential barrier to reaching the same savings levels.”
Women set to get a lot less when they stop working
Analysis by L&G has found this lack of engagement with key financial products, along with other factors, such as the gender pay gap, could see young women in the UK (aged 22-32) with the equivalent of just £12,873 per year by the time they reach retirement in the 2060s. This compares to young men being on track to have almost a third more in their retirement pockets – receiving £19,803 in income per year on average.
Ms Photiou said: “Our research shows young women are currently projected to have £300,000 less in their pension pots than their male counterparts by the time they reach the current state pension age. This is a shocking figure, and one that shows the gender pensions gap isn’t going anywhere any time soon.”
A need to build financial confidence
To prevent the retirement crisis from getting worse, there’s a need to help women build their confidence when it comes to their finances. Ms Photiou added: “To help close the gender pensions gap, more support is needed so women can make informed decisions about their future as early as possible. As an industry, we need to work together to get more people engaging with their pensions and ensure there is education available. We need to help women become more financially confident.”
6 tips to feel more confident about your pension
- Get your payslip – remind yourself of how much both you, and your employer, are contributing under auto-enrolment. Make a note to bump this up whenever you are able to. Decide on a percentage of your salary and if you get a pay rise, make sure you update your pension contribution.
- Check your state pension – take a look at how much state pension you are on track to get. You can do this at Gov.uk. Check for breaks in your National Insurance record that might affect how much you get – and set about filling these if you can.
- See what it means to retire comfortably – keep an eye on the Retirement Living Standards. According to the Pension and Lifetime Savings Association, you currently need a ‘minimum’ of £12,800 in annual income. But for a ‘comfortable’ retirement, this rises to a far more hefty £37,300.
- Understand how much you might have – sit down and work out how big your whole pot is. To get a sense of the annual income your pension savings might generate when you stop working, make use of the MoneyHelper pension calculator.
- Get more engaged with your money – don’t take the view that pensions or investments, such as stock-and-shares Isas, are products that are too complicated for you. There are plenty of guides to get you started here at Compareandinvest.
- Seek advice – if you need more help, or are finding any area of your finances particularly difficult to understand, speak to an independent financial adviser. Read more here.
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