Budget 2021: Sunak announces pension lifetime allowance freeze
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Pension savings are usually built up through AE rules, which force employers to set up workplace schemes for eligible staff, which are then contributed to. AE was introduced in a bid to prepare workers for retirement but recent analysis shows many women are not benefiting from the changes.
Last month, on International Women’s Day, research from Scottish Widows showed young female savers are set to have £100,000 less in retirement income when compared to their male counterparts.
In more immediate analysis, Profile Pensions recently detailed the average UK male pension has a value of £40,084.
For women, an average of £24,445 was found, a difference of just over £16,000.
These figures are concerning and appear to have encouraged some women to take action with their pensions.
Recently, Barnett Waddingham surveyed 2,001 UK adults between 23 and 27 April 2021, of which 1,023 respondents were women.
The research found over two in five (44 percent) working aged women with a workplace and/or a private pension have taken action regarding their pension in light of the gender pensions gap.
Most commonly, women have increased their monthly contributions into their pension, with 14 percent of women stating they’ve done this already.
This is highest among those aged between 18 34, at 19 percent , and is higher amongst those working full time (16 percent) than part time (14 percent).
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Barnett Waddingham explained women have taken many similar actions in recent months, as it detailed the following: “Having heard about the gender pensions gap, other women have taken steps to engage in conversation with both loved ones and professionals. A tenth (nine percent) of women have spoken to their partner about pension savings and the pensions gap, while eight percent have sought financial advice to increase retirement savings. Women with a private pension/ SIPP are much more likely to have sought financial advice, at 13 percent .
“The research also determined what steps women are planning on taking, looking forward, with regards to their pension. Over half (55 percent) of women plan on taking some action in light of the gender pensions gap, showing that by and large women are taking pension matters into their own hands.
“A fifth (20 percent) of women are planning to increase monthly contributions into their pension, in order to build more substantial retirement savings. And 14 percent of women plan on seeking financial advice.
“One tenth (nine percent) of women have also supported recent campaigns that call on the Government to change policies to support women’s pensions – however, this leaves 91 percent who have not, indicating a lack of awareness or understanding of the campaigns calling to improve women’s retirement wealth.”
However, despite these moves, the same research found that 45 percent of women are not planning to do anything with their pension and “this could indicate that they are already on track to a desired retirement lifestyle, or, and perhaps more likely, that there remains a lack of education and knowledge surrounding the disparity in retirement wealth and how to fix it.”
Amanda Latham, a Policy & Strategy Lead at Barnett Waddingham, reflected on these findings.
She said: “Recent months have shed light on the gender pensions gap – leaving women dangerously underprepared financially for retirement – and it seems that this is not falling on deaf ears.
“A proportion of women have acted already to either build their savings or seek support from professionals or loved ones, and even more are planning on taking significant steps to close the gap themselves. While this is encouraging, it’s critical that the onus for change does not fall on individuals alone – the pension system is intrinsically biased towards men, creating a stark disparity in wealth at retirement that needs to be addressed at its core.
“It’s therefore not enough to simply say that women need to contribute more to close the gap. Instead, we need to consider fiscal, behavioural, and societal issues collectively, and work to create a more robust and inclusive pensions framework that offers fairer solutions for all. For almost a third of women relying on a state pension alone, the difference between a financially stable retirement and a total change in lifestyle could be severe, so a great deal more support and education is needed to reduce this figure.”
Amanda concluded by calling on the Government to review AE rules in a bid to boost female retirement prospects.
- “It is clear that the auto-enrolment minimum threshold impacts women more than men. The government should review this in the context of gender. Whilst there are proposals to remove the minimum earning requirement, this should be done sooner rather than later.
- “Increase minimum level contributions. People typically anchor to the default level of contribution when joining a pension plan, which is generally impacting women more than men. This again should be reviewed in the context of gender, and done so as soon as possible.
- “Remove the upper age band for pensions auto-enrolment.
- “If not removing the lower earnings threshold, auto-enrolment rules should consider income from multiple jobs, not just one job.”
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