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Sisters are saving for themselves

Cherry Reynard
Written By:
Cherry Reynard
Posted:
Updated:
10/03/2015

In the wake of International Women’s Day, two surveys have found that women are increasingly taking charge of their financial futures.

Women retiring in 2015 can still expect a retirement income 25 per cent lower than men, finds research by Prudential, but this represents the lowest retirement income gap since 2009.

The ‘Class of 2015’ survey found a retirement income gender gap of £4,800. Women planning to retire this year have, on average, an expected retirement income of £14,300 compared with £19,100 for men.

This year’s female retirees have the highest average expected annual retirement income ever recorded by Prudential’s research, and expect to be nearly 17 per cent better off than those who planned to retire last year. In contrast men’s expected retirement income expectations have increased by just one per cent since last year.

In a separate study BlackRock found that ‘SMART’ women – those who save and invest more, make retirement a priority, actively invest to generate income, recognise the importance of mixing investments and take financial planning and advice seriously – have built an extra £48,000 compared to the average woman who has savings and assets worth just £10,000.

This group of women feel more in control of their financial future (90 per cent), compared to under half (49 per cent) of women on average. Interestingly, SMART women have a personal income of £28,000 a year – a little more than the UK average salary but are saving more and investing it better.

Equally, the Prudential survey found that the rise in women’s expected incomes is reflected in their increasing optimism about retirement with more than two-fifths of women believing their pension will provide for a comfortable retirement, compared with just 29 per cent in 2014. Meanwhile, 50 per cent of women feel financially well-prepared for retirement compared with just 41 per cent in 2014.

Michelle Cracknell, Chief Executive of The Pensions Advisory Service, said: “It is great news that the retirement income gender gap is reducing, and we should see the gap continue to shrink in the future as changes in employment patterns work their way through the current generation of working women.

“However, there are systemic and cultural issues that impact on the ability of women to build up retirement savings, such as career breaks, part-time working and multiple low paid jobs, and they all contribute to the significant difference in the amount of pension received by men and women.

Vince Smith-Hughes, a retirement income expert at Prudential, added: “There are a number of steps that both men and women can take to further improve their retirement income prospects, including maintaining pension contributions during career breaks and if possible, making voluntary National Insurance contributions upon returning to work. A consultation with a financial adviser or retirement specialist could also help people construct a sound retirement plan and secure a more comfortable retirement income.”

The BlackRock survey found that, Britain’s young women are on track to be the SMART women of the future. Young women (25-34) save and invest more compared to any other age group and almost one in two understand that the state pension will not be sufficient in meeting their retirement income needs. These women are the most likely to take higher risks to achieve higher returns, suggesting that young women understand the implications of living longer.

Sarah Melvin, Chief Operating Officer for EMEA Retail at BlackRock, comments: “The idea of International Women’s Day is to help women have bright and rewarding futures. We truly believe that Britain’s SMART women could not only ‘Make it Happen’ in terms of securing their own financial future but inspire others too. Just being more financially engaged and aware, thinking longer-term and having a plan can make a big difference.

“It is promising to see that young women are already starting to take ownership of their investment horizons and many recognise that the state will not be there for them in retirement. If they continue this pattern of behaviour, we think they are on track to become the SMART women of the future.”