The pensions sector needs to think afresh about how best to communicate with savers, especially women. A Pensions and Lifetime Savings Association (PLSA) survey, published in May 2017, showed that millennial women feel more financially anxious than their male peers. If even this group, which has the smallest male-female pay gap of any age bracket, feels less confident than men about money matters, then there is clearly an issue.
Similarly, pan-European research from Allianz, published in January 2017 as part of its When will the penny drop? Money, financial literacy and risk in the digital age report, found that women still lag behind men in financial literacy, particularly on risk-related issues. Allianz identified lower levels of financial confidence among women as one of the possible explanations. So what to do about it?
Part of the answer lies in changing the way we talk. A PLSA poll conducted in September 2017 shows that 78% of people do not know how much they should be saving for their retirement and do not even know where to look for the information. Hardly surprising when we consider the jargon that some parts of our industry like to use. Target replacement ratios, anyone?
The UK could learn a lesson from Australia, where a series of retirement income targets are used to help people understand how much they need to save. The Australian targets show what kind of goods and services people could afford on each of three income levels. So someone on a ‘modest’ income could run an older car, but a ‘comfortable’ income would be enough for a better quality motor. The Australian targets take the same approach to spending on holidays, clothes and home maintenance.
We think a similar system could work in the UK and our Hitting the target consultation paper outlines a system of national retirement income targets to do just that. We looked for views on how the targets could be designed, and the consultation closed on 12 January 2018. Retirement income targets could help everyone, women and men, feel more confident about their pensions and savings.
James Walsh is policy lead, engagement, EU and regulation at the Pensions and Lifetime Savings Association (PLSA)