Women do not save enough for pensions due to the persistence of the breadwinner model and a lack of confidence in their own financial aptitude, a new study shows, but a proposal to introduce carer credits to auto-enrolment was rebuffed by the pensions minister this week.
Many women in their 20s and 30s cut their pension contributions to cover the cost of childcare, or as a result of taking time off to look after children, new research has found.
What you are asking is, can somebody save for those who are not earning
Ros Altmann, pensions minister
The paper, 'Closing the Pension Gap: Understanding Women's Attitudes to Pensions', from gender equality charity the Fawcett Society in collaboration with Liam Foster and Martin Heneghan from the University of Sheffield, said women consistently described using their own salary to meet the whole cost of childcare.
The study also found that women tended to seek advice from men, mainly their fathers, and defer to them on financial decisions such as pensions.
As a result of cutting contributions, many women are undersaving for retirement. Provider Scottish Widows’ ‘Women and retirement report 2015’ found only around half of women (52 per cent) save adequately for retirement, compared to 60 per cent of men. Nearly a quarter do not save for retirement at all.
Speaking at the launch of the Fawcett Society study this week, Foster said a significant number of women are fearful about the future. “There’s low levels of confidence and high levels of stress,” he said.
To tackle undersaving among women, the Fawcett Society proposes that:
information should be provided to those embarking on parental leave about the impact this will have on pensions;
the partner who stays in work should contribute to the pension of the partner who cares for the children;
carers should be able to earn credits for auto-enrolment, similar to those counting towards the state pension;
student loan payments or childcare voucher payments, once they are no longer needed, should default to pension payments;
girls’ confidence in maths should be strengthened by defaulting girls who do well in their GCSE maths into A-level maths, with the option to opt-out.
Sue Pemberton, head of defined contribution and wealth at consultancy Xerox, said women’s lack of confidence with numbers should be addressed early on: “It seems we’re waiting too long before we’re starting to address this issue.”
Who pays for non-earners?
Pensions minister Ros Altmann said getting women to save was particularly important because of their life expectancy.
“Even if you save the same as a man, whatever you save has to last longer than for a man,” she said, adding that the savings challenge is compounded by a persistent gender pay gap.
Altmann said the new state pension and auto-enrolment address the problem of women's lack of retirement savings.
However, she disagreed with the concept of auto-enrolment credits for carers, saying while this was happening in the state system, it would be difficult to envisage in the private system.
She said: “What you are asking is, can somebody save for those who are not earning.”
