Women and retirement: the triggers for saving
By Lynn Graves
Despite millions of workers being enrolled in workplace pension schemes, under-saving for retirement continues to present an issue for the UK, and in particular for women, who are less likely than men to be saving adequately. Research from the Fawcett Society reveals a great opportunity for employers and the industry to engage with female workers, at times when retirement planning is on their minds.
As a pension provider, we recognise that there are key triggers in people’s lives that prompt them to think about their long-term saving. It’s important that we understand these in order to better support people in saving for retirement. With only 52% of women saving adequately for retirement, compared with 60% of men, the Fawcett Society’s research looked at the key savings triggers in women’s lives. The research, which was supported by Scottish Widows, was conducted through interviews with women aged 25 to 39, earning between £24,000 and £40,000 per year.
It’s no surprise that starting to earn a salary was identified as the first major savings trigger in most of the participants’ lives. Twenty-two emerged as an age that a number of participants felt was ideal for starting to save for retirement, likely because many entered the workforce as graduates. Those who started saving early weren’t strongly engaged with the initial choice, but now feel it was the sensible thing to do, while those who started later tend to regret that choice.
With automatic enrolment having reached all but the smallest of workforces, starting work will be a trigger of increased importance. It presents a great opportunity for employers and pension providers to help employees appreciate the benefits of a pension. This could discourage opt-outs, increase the rate of savings and set the tone for better engagement with pensions throughout their working lives.
Age milestones such as thirty and forty were also seen as key points at which people get more serious about their long term finances. Some of the younger participants saw these future ages as points at which they will really take action, although others, who’d passed a milestone age reflected that although they’d thought about it more, they hadn’t necessarily made changes.
This seems to present an excellent opportunity to proactively engage people as they approach these ages, turning interest into action. There are a number of things employers and the pensions industry might look at to achieve this, and the Fawcett Society makes an interesting recommendation: in addition to potentially introducing Save More Tomorrow (where pension contributions increase in line with salary increases), we could consider ways of encouraging savers to commit to saving more at future ages – perhaps defaulting their future selves into paying more into their pensions.
Getting your house in order
Those participants who didn’t start saving as soon as they started work often felt they had other priorities to be addressed first. Getting on the housing ladder and paying off student debt are two key examples. Research from Barnett Waddingham reflects that saving for a house is most commonly cited by 18-29 year olds as their main financial priority, followed by paying off debt. In the context of rising levels of student debt and house prices, this is a concern. Employers may look for support with communications focused on young people, encouraging them to think about their finances over a lifetime, as well as short and medium term priorities, that could go some way to address this problem.
It will be interesting to see how this is impacted by the introduction of the LISA, which has the dual purpose of saving for a first home and saving for later life, but lacks employer contributions.
The key triggers already discussed can reasonably be expected to impact men in much the same way as women. Having children however, is where we see a clear disparity. The impact of having children appears mixed, with some of the women in the research identifying it as a reason to get more serious about pension saving, but others saved less as their incomes were further stretched. For many, there’s a triple cost to having children: time off for maternity leave, childcare costs, and returning to work on reduced hours.
While we recognise there is still a big savings gap when it comes to women and retirement, we’re encouraged by the opportunity for us and employers to improve things – particularly with communications targeted specifically at female workers.
Information correct as at August 2016.
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