Pensions – sisters still aren’t doing it for themselves

A major report, published by Scottish Widows, reveals that not only do women suffer the much publicised ‘pay gap’, but that they also save less for the future than men.

This ‘pension gap’ reveals that 54% of men who could and should be saving for retirement are saving adequately – compared to just 41% of women. Most worryingly – this ‘pension gap’ is growing. Between 2006 and 2007 the percentage of men saving adequately increased from 49% to 54%, but for women it remains stuck on 41%.

This gap exists partly because women continue to experience a large earning gap compared to men, and so have less ability to save. Women earn just 62% on average male earnings. This is reflected in a similar gender gap in pension savings – women’s contributions to defined contribution pension schemes are typically just 66% of men’s.

However – the pension gap is not just down to earning potential. Men who are in work are more likely to belong to their work place pension scheme than women – 35% of women do not have any pension scheme compared to 22% of men. And of those that are saving, men save 10.3% of their earnings on average – compared to women who save 9.3%.

Employers also contribute more money into male employee’s pension schemes. The typical employer contributions into are worth 6.5% of annual salary to a man, compared to just 5.7% for a women.

Ian Naismith, head of pensions market development at Scottish Widows, says: “It has widely been reported that women are disadvantaged in the labour market in terms of earnings – what this report reveals is that as well as earning less, women are saving less for their futures than men. And even the women that are saving in a pensions are saving a smaller percentage of what they earn – effectively compounding the effect of the pay gap, and making the gender ‘pensions gap’ even wider. The gender gap in state pensions is falling because of the Government’s reforms, but the gap in private pensions is increasing.”

The Scottish Widows Report ‘What Women Need – Pension provision for today and tomorrow’ – which is in its third year – also reveals that a third of men claim they have a financially dependent spouse/partner (this equates to 7.3 million women).

At the same time, women are less likely to be in full time employment than men:

Percentage of 18-29 year olds in full time work (over 30hrs per week)
Male 62% - Female 53%

Percentage of 30-50 year olds in full time work (over 30hrs per week)
Male 82% - Female 45%

Percentage of 51-64 year olds (men) and 51-59 year olds (women) in full time work (over 30hrs per week)
Male 45% - Female 35%

This means that many women are not accruing sufficient pension funds to ensure a comfortable retirement.

For many women family comes first, over a third (36%) have at least one dependent child and 28% have had to stop or reduced their savings for the long term because of their children. 70% of women not in work are housewives and 43% of women not working are caring for children.

Ian Naismith, head of pensions market development at Scottish Widows, says: “The outlook for women’s pensions continues to be bleak. Their working patterns are unlikely to change in the near future and they’re much more likely to stay at home and look after their children than men. We all have the problem that we don’t prepare enough for our futures but women need to realise that it’s up to them to put plans in place for funding their retirement.

“Women need to remember that without their own pension scheme in place they could be left without anything for their retirement. If women don’t want to tie up their money in a pension scheme then they should consider other options such as an ISA – then the money is available if it’s needed for emergencies. They also need to be bold in their investing. Far more women than men save only in bank accounts and cash ISAs, but over the long term an equity ISA or a pension is likely to give much better returns.”

Men vs women – The pensions facts

Only 34% of women have Defined Benefit occupational pension schemes compared to 46% of men.
Similarly only 18% of women have Defined Contribution occupational pension scheme compared to 22% of men.
For those people who are saving into a Defined Contribution scheme women are saving on average £84 per month and men are saving £128.