Women face pensions crisis as inflation soars

Women could be heading for an even worse retirement crisis than men, with women more likely to underestimate how much they need to save into their pension and fewer women investing despite rising inflation.

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These are some of the findings of our Relationship with Money report, based on a Censuswide survey of 2,000 adults earning over £50,000 a year.

On average, female respondents think they’ll need £472,000 to fund a comfortable retirement – that’s £77,000 less than their male peers. Whilst this sounds like a sizeable pot, worryingly, our analysis suggests someone with a pot of this size could risk a retirement income shortfall or be forced to work for several years longer than anticipated.

How much I think I’ll need for a comfortable retirement

Source: RBC Brewin Dolphin, ‘Understanding our Relationship with Money’

Despite these lower expectations, just 37% of women are confident they’ll save enough for retirement, versus 57% of men. Even then, when we asked what they’d do with an extra £100 per month, only 31% of women would save it into a pension, compared with 41% of men.

Yes, I expect to save enough for a comfortable retirement

Source: RBC Brewin Dolphin, ‘Understanding our Relationship with Money’

Mind the gender pension gap

This lack of understanding around saving for retirement suggests the ‘gender pension gap’ is unlikely to narrow any time soon.

The gender pension gap stems from the fact that women tend to earn less than men¹ and are more likely to take career breaks to look after children. On average, women’s pension pots at age 65 are only one-third of men’s at the same age².

It is clear that women need to take action now if they are to enjoy the same standard of living as men in their later years.

Inflation eroding savings

Having a robust financial plan is especially important in a time of rising inflation, when excess savings could be losing value in real terms.

Yet our report found only 43% of female respondents invest, despite history showing that investing tends to offer better returns than cash over the long term. Among male respondents, the figure was much higher at 66%.

Yes, I invest (not including my pension)

Source: RBC Brewin Dolphin, ‘Understanding our Relationship with Money’

When we asked why they don’t invest, the most common answer among women was “lack of understanding”, cited by 40% of female respondents versus 23% of males.

This lack of understanding was evident elsewhere in the survey, with fewer women (29%) than men (39%) confident about money generally, and claiming lower understanding around investment terms like risk, diversification and compounding.

Advice especially valuable for women

Encouragingly, the report found that among the respondents who took advice, their confidence around investing and feeling prepared for the future improved – and this was particularly the case for women. For example, when we asked what they valued most about their adviser’s service, the most common answer among men was “growing my money”, cited by 27% of men versus 17% of women. In contrast, the most common answer among women was “sense of understanding”, cited by 23% of women versus 14% of men.

Meanwhile, when we asked where they’d achieved a better outcome by using an adviser than doing it alone, male respondents gave “growing my money” as their top answer (46% vs 37% of women), while female respondents said “having a solid plan to achieve my goals” (43% vs 40% of men) and “sense of understanding” (41% vs 30% of men).

Next steps

There are some simple steps you could take now to improve your chances of a financially secure and fulfilling future.

1. Make the most of workplace pensions and tax relief

Pensions are a great way of saving for your future because of the tax relief you receive on personal pension contributions. A £100 contribution only costs you £80 if you’re a basic-rate taxpayer or £60 if you’re a higher-rate taxpayer. If you’re a member of a workplace pension scheme, you’ll also benefit from employer pension contributions, which can really help to supercharge how much money you have at retirement.

2. Try to make up for any gaps by increasing contributions if you can

If you’ve taken a career break, think about whether you could increase your personal pension contributions to make up for any savings gaps. This might seem impossible right now, but creating a budgeting and savings plan is a good place to start. It may be the case that you can afford to save more into your pension once your children finish nursery, for example.

3. Check whether your existing savings could be working harder

If you’re unable to save more money each month, another way to boost your finances is to check your existing savings are working hard enough. Workplace pension providers often put you in their default fund, which might not offer enough long-term growth potential. Meanwhile, leaving excess money in a cash savings account could result in your money losing its real value as inflation erodes its purchasing power. A financial adviser can help you decide which pension fund is right for you and invest your money so that it has the opportunity to grow in real terms over time.

4. Get some smart advice

Pensions and investments can seem complicated, but sticking your head in the sand isn’t the answer. The steps you take today could make a real difference to your future, enabling you to reach your goals faster and enjoy a fun-filled retirement.

If you’re unsure how to get started, speak to a financial adviser. By learning about you and your goals, they’ll be able to advise on the best way to save and invest your money, so you can feel confident you’re on track for a secure financial future.

Take control of your finances by speaking to one of our financial advisers today.

¹ Office for National Statistics

² Now:Pensions, ‘The Gender Pensions Gap Report 2022’

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The value of investments, and any income from them, can fall and you may get back less than you invested. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.