Georgie Edwards: Incorporating affirmations in any educational content can help shift women’s attitudes to risk
The introduction of auto-enrolment (AE) in 2012 intended to improve pension adequacy for people, particularly those less likely to save, such as women, part-time workers, and low and middle earners.
Yet, the reality is that women continue to face a stark gender pensions gap. Women typically have 43% less than men in their pension pots at age 55.
This is not helped by the fact that the ONS life expectancy data consistently shows that women in England and Wales live longer than men and therefore need more retirement savings to fund later life.
Why women retire with less
So, what is driving this pensions gender gap? Women typically shoulder a greater share of caregiving responsibilities. This means that they are more likely to take career breaks for childcare and/or engage in part-time employment – including in later life if they have care responsibilities for older relatives. With the growing concerns around wrap-around later-life care and an ageing population, this challenge isn't likely to reduce in the near or medium term. The compounding impact of lower pay, saving for a shorter duration, and reduced pension contributions can weigh on women's pension pots.
Many women feel they need to return to the workforce after retiring because they have insufficient levels of pension savings.
This is echoed by recent data from the Living Wage Foundation, an organisation that campaigns for employers to voluntarily pay a real living wage, which shows that 67% of women feel they need to work for many years beyond the typical retirement age compared to 57% of men.
Reforms to AE
Another challenge is that women are still disproportionately represented in the lower paid roles. Typically, AE only kicks in if you earn at least £10,000 from a single job and even then, employers can operate a 3-month postponement period and test for auto-enrolment eligibility after this waiting period.
While women who earn more than the current lower earnings limit of £6,240 can still join a workplace pension, employers are not obliged to contribute. In addition, AE pension contributions are only required to be paid by members and employers on earnings above the lower earnings limit (and below the upper earnings threshold).
The minimum requirements place a large segment of the female population at a disadvantage when it comes to pensions adequacy.
The obvious solution would be to have AE contributions applied from the first pound earned rather than to income earned between earnings thresholds. While the government proposed this idea in 2017 and committed to introducing this reform in the mid-2020s, this has not yet come to fruition.
Improving pensions adequacy should be a core focus now for industry and government. However, the government delayed the second phase of the pensions review, which deals with pensions adequacy, when increasing employer costs with rises to national minimum wage and national insurance contributions for employers.
The second phase of the review, once announced, should be a step in the right direction.
The good news is that there is always more that industry can do to play its part in bridging the pensions gender pensions gap.
With that in mind, how can master trusts empower women through their pensions?
How can master trusts help?
There is an under-appreciation that women tend to be less confident investors, with a lower risk appetite than male counterparts.
That means women are not taking advantage of all the investment vehicles and growth opportunities, and that a more risk-averse mindset can also be what deters women from reaping the full potential of their defined contribution (DC) schemes.
This topic has been bubbling on for years, but I believe it must go beyond snappy emails, webinars and learning opportunities. The online account experience itself must mirror these aims. Clear, concise websites and mobile apps right through printed letters must reinforce simplicity. Ensuring that core journeys are straightforward to complete, such as updating beneficiaries, serves to demystify pensions for the member.
Bite-sized educational material must be delivered in small, easy chunks and constantly updated at a regular cadence. After all, educating oneself is a lifelong process not a tick-box exercise.
It is also worth reviewing the terminology used across both online and offline pensions communications materials to ensure descriptions are free of jargon.
At TPT, we also found that updating the customer engagement platform and adding small step goals are effective ways to provide personalised solutions that support the varied needs of female members, but there is much more that we all can do in this space.
Incorporating affirmations in any educational content can also help in shifting women's attitudes to risk. This can be quite powerful if done sensitively as receiving guidance in an overly rigid way may not bear fruit and may not prompt a shift in mindset.
The right combination of bite-sized educational materials and an empathetic approach can go a long way toward helping master trusts empower women by reaping the full benefits of their pensions.
Georgie Edwards is head of DC at TPT Retirement Solutions
