A pensions gender solution

It reported last week that women’s average retirement income will be £4,900 lower than men if they retire this year. If its research is right, it means female retirees in 2018 will be almost a third worse off than men.

Men are expecting to retire on an average annual income of £21,800, according to the research. That may not seem a fortune but it is much higher than women’s expected income of £16,900. 

The fact that anyone is retiring with an income which will leave them struggling is a desperate shame.

And that is just the average. Drilling down into the research reveals that one in six women will retire with an income below the £9,998 level recommended by the Joseph Rowntree Foundation’s Minimum Income Standard for a single pensioner. Some men are facing retirement penury too, but only one in 10.

Neither of those two figures are pleasing. The fact that anyone is retiring with an income which will leave them struggling is a desperate shame.

But then again governments, companies, advisers, journalists et al have been banging on for years about the pensions disaster facing millions who do not save for their later years.

If we can not solve that problem, how can we begin to try and solve the problem of the pension gender gap?

The fact is that they are two different issues and solving one will not lead to the other ceasing to be a concern.

So if we solved the pension-saving problem, the gender gap would remain. And sorting out the pension gender gap would still leave many people facing a retirement income shortfall.

Are there solutions to either of these? The first is easier to try and solve.

In short, educating people that they face financial problems when they retire if they do not act to do something about it is the best solution.

As many advisers know, if you can have a sensible conversation with people, they pretty soon understand how much they need to save to ensure a decent income in retirement.

Many are shocked, of course. I know from writing and interviewing case studies about their money that there are plenty who reckon their £30,000 or £40,000 pension pot will be enough to see them have a decent income when they stop work.

But it is not a great leap for most to get the fact that they will actually need a much greater nest egg to achieve their retirement dreams.

Or indeed, they could have to face up to the fact that they may have to delay the age at which they retire. Frankly I think we will see a growing trend towards that with some people actually choosing to work well into their 70s.

There is a new platform which encourages just that. Next-Up helps people find paid and unpaid roles in what it calls ‘unretirement’.

Its research suggests that two-fifths of retirees over 55 reckon that retirement is an outdated concept. Almost a third want to continue to use their skills in retirement and more than a third have apprehension or concerns around losing their identity.

The study paints a jolly picture of well-educated people who have choices. I think that is a great thing and I am pretty sure that most financial advisers and, come to that, journalists, will have choices when it comes to being able to decide when to stop working.

But what concerns me are the many millions who will not have the choice and who may be forced to carry on working just to get by as they get older.

The solution? I have no doubt that if everyone were able to sit down with a financial adviser and hear a few home truths about their future dreams and current savings habits then the problem would disappear for many.

Those that did not act would have made the choice not to, but it would have been their choice to face a miserable retirement rather than do something about it.

The reason why many people do not sit down with financial advisers is because they think they can not afford to. If the government gave everyone an advice fund - which would have to be spent with a registered financial adviser - of say £250, I reckon that would go a long way to help solve that problem. 

But what would solve the gender pension gap? I am with Gem Durham, IFA at Obsidian, who told Financial Adviser last week: “Until the gender pay gap is eradicated the gender pension gap won’t be either”.

The Pru’s retirement income expert Kirsty Anderson, made basically the same point. She said: “As working patterns continue to change and become more flexible and shared parental leave is more widely encouraged by the government agenda and employers, the future looks positive for narrowing the retirement gender gap”.

In other words, when employers finally start treating men and women the same, not just in pay but in attitude and corporate culture too, then these financial inequalities will shrink.

In the meantime, we have all got to get on with the job of educating people about how the money choices they make now will influence how much choice they will have later.

Simon Read is a freelance journalist