Saving for later life is an essential part of your financial planning – but are enough of us doing it? New research from the Scottish Widows suggests that, while the pensions contribution gap between men and women has fallen to just 1%, there is still a long way to go before everyone is saving properly.
Their research suggests that while the gap between the genders in terms of adults who are “saving adequately” has fallen, there’s still a big gap in terms of how much men and women are saving on average. Because of this, it’s important to look at all the different factors together when it comes to investigating savings equality.
So, in this article, we’re digging into all the stats around pensions saving, as well as taking a look at how the Covid-19 pandemic may have impacted this issue.
What is the pensions contribution gap?
Simply put, this statistic is a measure of how many men are saving adequately for later life versus how many women. Saving adequately in this measure means saving enough to live on as pensioners without either having to continue working or relying on other support – it’s calculated at around 12% of your salary.
According to research from Scottish Widows, the pensions contribution gap has fallen to the narrowest it’s ever been, a difference of just 1%. The study found that 60% of men are saving adequately compared to 59% of women. Obviously, aside from the gender difference, there’s a big issue here in that so many people of either gender are not saving properly, around 4 in 10.
The other side of this issue is that on average women are still saving a lot less. So even if the gap is down to just 1% in terms of “adequate savings”, men are still in general saving significantly more – around £1,300 a year!
Scottish Widows suggest that this difference in average amount saved is caused by related gender pay issues, like the gender pay gap, a higher proportion of women in part-time work, as well as the higher frequency of career breaks for women. These career breaks can seriously interrupt the ability to save for later life, by effectively “resetting” savings. The study blames these structural inequalities for the pension contribution gap, arguing that more should be done to try and alleviate these inequalities to ensure pensions equality.
The study also found that young women are struggling the most, with fewer than half (46%) of women in their twenties saving the recommended minimum of 12% of their salary, compared with 54% of men the same age.
Is Covid-19 having an impact?
As with everything else over the past year, we can’t cover a story without also considering the impact of the pandemic. Unfortunately, it seems that the Covid-19 crisis is likely to exacerbate the pensions contribution gap.
The worry here is that some of the pandemic’s effects on industries like hospitality, where many people have been made redundant or had their hours reduced, is only going to make the gap more pronounced. As women tend to make up the majority of employees in this sector, the pandemic could end up rolling back years of progress.
Also, with companies frequently making their part-time staff redundant ahead of full-time colleagues, this seems likely to disproportionately impact those women working part-time who were already likely to not be saving adequately into a pension or other later life savings product.
While we all know we should be saving for later life, it isn’t always so easy. The best thing is to get some advice on what’s best for your situation. At Face to Face Finance, we offer pensions reviews, so we can take a look at your existing savings, as well as advice on private pensions, so we can identify the best scheme for you. Speak to a financial planner about your pensions today to help you make a plan and get cracking.