Women have to work an extra 19 years, on average, to retire with the same pension savings as men. To close the gap, a girl would need to start saving into a pension at the age of 3, according to NOW: Pensions’ 2024 gender pension gap report.
The gender pay gap plays a significant role in this discrepancy. Men tend to earn more over the course of their career, making it easier to contribute towards their pension and build a substantial nest egg.
Meanwhile, women are more likely to take a break from their career to take care of their children. A 10-year career break can amount to £39,000 in lost pension savings. So what can advisers do to close the gender pension gap?
Educating clients on benefits of third-party contributions
Research by Nucleus into UK Retirement Confidence found that just 12% of UK adults surveyed were aware that you could contribute to another’s pension.
Of the 78% that were previously unaware, only 21% would consider adding to another’s pension once they knew it was a possibility.
If you’re working with a client who’s reluctant to make third-party contributions towards their spouse’s pension, you may need to go a little further to emphasise the tax advantages. Some clients assume they’d pay into their spouse’s pension from their post-tax income, unaware that their contribution would be dealt with in the same way as it would be if it was paid into their own pension.
Third-party contributions can be particularly beneficial for high earners who’ve exhausted carry forward and reached their annual allowance. They can continue to benefit from tax relief, while also building upon their partner’s pension. Everyone wins.
Building financial confidence
One in three women say they don’t understand how their pension works - indicating a lack of financial confidence, according to Legal & General’s Lost Decade research. The same research found that women are also 38% less likely to have a stocks and shares ISA than men and 32% less likely to have a private pension.
So how can we build women’s confidence and help them make meaningful progress with their finances? Well, we can start by demystifying pensions and making them more accessible.
Pensions are simple, in principle. All you need to do is add money to a pot for the duration of your working life, enjoy the tax relief, and access that money at retirement.
But for some reason, pensions still appear inaccessible and complicated pensions to the average person and an engagement remains a challenge. Clients (of any gender) need more guidance, less jargon and easy access to pension dashboards allowing them to track their progress and save with confidence.
Improving access to financial advice
FSCS data suggests women seek financial advice less than men, so one of our biggest challenges is attracting and retaining female clients.
There are a number of possible reasons why male clients outnumber female clients. For example, women may be less likely to take an active role in the management of their finances when their partner or spouse is the primary earner.
When women do seek financial advice, they may struggle to find the right adviser for their needs. Just 16% of advisers are women, yet more than two thirds (69%) of women prefer to speak to a female financial adviser, according to a report by Handelsbanken Wealth and Asset Management.
However, when Schroders asked 200 women why they were leaving their ‘family’ adviser following the death of their spouse, 76% of respondents aged 50+ with investable assets over £50,000 said the gender of their adviser made no difference to their level of satisfaction.
Instead, they cited a need to be understood, a desire for more proactive communication and greater flexibility in the way the adviser communicates.
Regardless of whether female clients care about having a female adviser, the profession as a whole needs to intervene. By making advice more accessible and appealing to women, we can improve outcomes and get that little bit closer to tackling the gender pensions gap.
Attracting and retaining female clients isn’t just the right thing to do, it could become essential to a company’s survival. According to a 2019 report from the Centre for Economics and Business Research, by 2025, 60% of wealth in the UK could be in the hands of women, largely due to family wealth being inherited by women following the loss of their spouse.
The Schroders survey found that only 34% of women interviewed would continue to use their current adviser if their husband died or they got divorced.