Younger women could be creating difficulties for their retirement as more look to opt out of their workplace pension schemes.
According to data obtained from Royal London’s auto-enrolment records, over 1 in 10 (10.6%) women aged between 22 and 29 opt out of their workplace pensions.
Conversely, 2% more men in the same age bracket choose to remain in a workplace pension scheme.
Worryingly, 9% of women in retirement saving aged demographics opt out of workplace pensions with 8.6% of those aged 30-39 and 7.9% of 40-49 year olds looking to spend the money in the present.
Whilst the opt-out pension gap narrows as people age, there still remain a 1% difference in opt out rates with only 8% of males aged between 22 and 49 choosing to pay into a work based pension.
Towards the end of last year, Aegon found that the number of women without pension arrangements has nearly doubled from 7% in 2017 to 13% – and remains higher than the proportion of men without pension arrangements.
An analysis of the research found two main reasons for the pensions gender gap which is complete lack of pension awareness, and the criteria involved in auto-enrolment. These two causes are the likely motives to pension exclusion which is stopping women from saving for their retirement in the workplace.
The research revealed that more than double the number of women (34%) compared to men (16%) have no idea how much they have saved in their pension pot. In addition, women are more likely than men (40% vs 32%) to have never investigated what they will need, income wise for their future when they reach retirement age.
Helen Morrissey, a specialist in pensions at Royal London, said:
“The data highlights a spike in women opting out of pension saving in their 20s and 30s, most likely as they face other commitments like childcare or saving for a house.
“While this may seem like a good idea for them in the short term to fund other priorities, opting out of a pension will only lead to greater financial problems in the future.
“Getting back into the habit of saving for later life is difficult for women if they have missed significant contributions so we need to do everything we can to encourage these women to stay saving for the long term.”
Kate Smith, Head of Pensions at Aegon, commented:
“It’s hugely disappointing to see that despite the attention being given to addressing the gender pay gap, this increased awareness does not seem to have inspired women to show more interest in their pensions.
“Knowledge is key to helping solve the gender pension gap so it’s really worrying to see that more than a third of women remain in the dark about what they have saved for retirement – if anything at all.
“Women are also being let down by the current auto-enrolment criteria.
“Women who are more likely to be lower earners and work part time, are missing out on the benefits of retirement saving as they are less likely to meet the eligibility criteria for auto-enrolment. And those who are self-employed, risk being in a similar position without access to auto-enrolment.
“Auto-enrolment needs to be more inclusive to include lower earners, who are disproportionately female. A solution needs to be found for individuals with multiple jobs, each below £10,000 allowing them to benefit automatically from an employer contribution. This will help to close the gender pension gap.”
