Why women don’t save and why it matters to employers
I believe that women aren’t saving into pensions because they have different priorities. For example, if a female employee has a family they are more likely to be worrying about the day to day costs of childcare, food, clothes etc. rather than paying into a pension – this is reflected in the Women and Money Report by SavvyWoman whose survey showed that women were more likely than men to handle the short term finances.
Other priorities are often a factor when employees aren’t saving enough into their pensions, because they believe they cannot afford to pay into them: 65 percent of women and 52 percent of men said they wouldn’t be able to save more because they couldn’t afford it, according to the Scottish Widows Women and Retirement Report 2014.
The reason this is so pertinent for women, is that they still tend to earn less than men – if you have less money to live on, you have less money to save. Women are saving an astounding 40 percent less than men for retirement, and this gap has widened since the previous year, according to this report.
A lack of engagement with pensions has a clear impact for employees who may not be saving enough for their retirement. It is important for all individuals to save for their retirement, as we know that relying on the State is unlikely to be enough to support them. Ensuring good retirement outcomes for employees benefits employers: supporting financial security allows employees to retire at an age that is right for themselves and their employer.
The alternative is being faced with a workforce that has to work into their later years, which might not be in the best interests of the organisation. Furthermore, there is no longer a “touch point” or “excuse” to talk to employees about retirement with the abolition of the Default Retirement Age. Getting employees engaged earlier means the topic of retirement is no longer taboo and employees are set on the right track to get the right outcome for themselves
Why aren’t women engaged?
Pensions are clearly not being communicated in the right ways to all employees to ensure engagement from all groups; a cover all strategy doesn’t work. Employee communication should work along the same lines as marketing: know your audience. You don’t sell a product to different people in the same way.
Employers have a duty to communicate with and educate ALL of their employees about their benefits, not just Pensions, and it seems that this is not the case. 76 percent of women don’t know how much they need to retire and only 15 percent said they fully understand Pensions according to the same Scottish Widows study.
If the women in a company do not understand the value of their pension scheme, then that company is spending a lot of money on a benefit that is not being fully utilised. They may also not know what the State provides them – if they are aware of what their State Pension will be, they may realise that the gap between what they have and what they want their future savings to be is not so big.
Furthermore, women tend to earn less than men and there are often more women working part time than men. To add to this, the threshold for Auto-enrolment is being raised to £10,000 meaning that 170,000 fewer people will be automatically enrolled into their workplace pension, of which 120,000 (69%) are women, according to the Scottish Widows Report . Lower-earning, part-time working women aren’t going to be engaged because no one is targeting them, they might not be “eligible” for Auto-enrolment and so they get forgotten. They will not be engaged with their pensions if no one is trying to engage them.
Should part-timers consider becoming full time workers?
If it is possible for employees who currently work part time to move into full time work then it could be beneficial for them in the long term. If an individual only works part time, they will be saving less into their pension and this may mean they need to work longer into retirement.
In addition to this, the smaller amount of money earned through part time work will often be earmarked for particular things in an individual’s monthly budget, and there may not be much left over to save for the future. By moving into full time work, employees have the opportunity to save more, and retire at an age that is more reasonable and suitable for them.
There is a caveat that must be added here: those on lower incomes may be claiming certain benefits which they may not be able to if their working hours and incomes increase, which is something to bear in mind for anyone considering this.
What you can do
If employees are opting-out of Pension schemes, many of which feel they have other priorities for their money, the way to encourage them to re-engage is to help them understand the importance of saving for the future. It’s alright for an employee to retire on a small pension pot, if that is enough for them. So it doesn’t matter how much an individual earns, as long as they have a plan and they know what they need to save in order to get the retirement that they want.
The key to getting employees to save into their pensions is education and awareness – many people don’t know how much they need to save, or that it is important to start saving as soon as they can. Specifically targeting this group of employees who need the most help to secure their retirement outcomes, increases their awareness, their understanding and their engagement. This means employers can help to support better outcomes for ALL employees across their business.
To do this, the communication and education provided needs to be relevant and useful to the target audience. This involves actually communicating with staff directly, in a two-way dialogue to ensure you are meeting all of their needs and providing them with information and tools that are beneficial and relatable to their lives in and outside of work.
Part of the Jelf Group, Jelf Employee Benefits is an employee benefits consultancy offering strategic advice and procurement of employee benefits for SMEs across pensions, group risk and health insurance.
Jo is passionate about helping employees be better with money and eliminate financial stress via fun and engaging financial education & consultancy that delivers results, namely happier workplaces.
