Is there a need for better targeted pensions education for female employees?

female employees

Need to know:

Research published by Aon in 2016 indicates that women have lower levels of financial confidence than men. This has a domino effect on how they then make decisions around saving for retirement.
A pensions education programme that discusses retirement savings in relation to taking time away from work to have children, deal with a divorce, and part-time working could be particularly beneficial for women.
Making pensions education more visible in the workplace is a good way to engage time-poor female employees by making the information easier to access.

Female employees, on average, have £53,000 in their occupational pension pot, compared to £120,000 for male employees, according to The lifetime savings challenge report 2017, published by Close Brothers Asset Management and the Pensions and Lifetime Savings Association (PLSA) in November 2017.

Furthermore, less than a quarter (23%) of female employees feel well prepared for retirement, compared to 36% of male employees.

With this in mind, is there a gap in employers’ financial education provision? Should employers be drawing attention to, and helping, female employees with specific issues that may impact the size of their pension pots, such as taking a career break to raise a family?

Causes of the gender pensions gapSmaller pension pots among female employees can be attributed to a few key reasons. First, a link can be made to the gender pay gap: if a female employee is earning less than male colleagues, for example, due to reduced working hours, then the amount they can afford to contribute to their pension will also be less. Darren Laverty, partner at Secondsight, says: “Even if the employer contributions are equal, […] the gender pay gap affects it so the actual amounts going in [are] less.”

Stereotypically speaking, women are also more likely to take a career break to have children. This results in a period of reduced earnings, and therefore, less pension savings, says Catherine Stewart, retirement expert at Scottish Widows. Linked to this, many women return from maternity or parental leave to work part-time hours. “A part-time salary then means that people are part-time pension saving. Women don’t realise the effect that part-time working will have on their pensions,” Stewart adds.

In some cases, taking a career break can slow down potential career progression, which can then have a knock-on effect on earning potential, adds Laverty.

Expectations around retirement age in relation to life expectancy can also pose savings challenges for female employees. Aon’s Defined contribution members survey 2016, published in October 2016, found that overall, women expect to retire six months earlier than men, yet they typically live for three years longer. Lynda Whitney, partner at Aon Hewitt, says: “That may not sound like a huge amount, but actually that means they probably need to save about 15% more just to reflect that difference in life expectancy if they’re looking for something to provide them with income across the whole of their retirement.”

Family life could impact a woman’s pension saving too, because childcare and family commitments may lead to some female employees not prioritising their pension plans. This includes the expense of childcare provision taking away from the amount a woman may be able to contribute to her pension. “Having a child prompts people to think about financial planning; they think 'actually now is really the time to get my affairs in order'," explains Stewart. "What happens is they become quite busy and it just goes to the bottom of the priorities. What we've seen as well is that it's normally the woman [paying] childcare costs, so it's not really seen as a household expense. It's almost seen as the woman needs to pay for it as well.”

The impact of financial confidenceThe aforementioned Close Brothers Asset Management and PLSA research found that 51% of female employees feel financially unprepared for retirement, compared to 35% of male employees. This lack of financial confidence can impact female employees' financial decision-making, including how they may approach pension provision. “Women risk disengagement because they don’t understand [pensions], and it leads to poor decision making and they feel less empowered about the pensions with a weaker sense of ownership,” says Stewart.

How can pensions education be tailored towards women?This lack of financial confidence means female employees may potentially have more to gain from a workplace financial education programme, adds Whitney. “[Women] have much 'lumpier earnings profiles' during their whole career, and that makes [pensions] something that is more complex for them to plan,” she says.

This could be attributed to factors such as periods of part-time work or a career break, she adds.

In addition to addressing these issues, pensions education can also explore how much it costs overall to retire. Michael Hill, founder and chartered financial planner at Greenstone Financial Planning, says: “A specific education piece would be about how much do [employees] need to save for retirement, […] therefore what do [employees] need to start saving now. People don’t know how much to put aside.”

Pensions education should also highlight the impact having children will have on retirement savings to both partners, adds Stewart. “What we find is that couples aren’t sitting down and talking about it. The one or the other of the couple absorbs all the cost,” she says.

Pension provision in relation to divorce proceedings should also be considered; Scottish Widows’ Women and retirement report, published in November 2017, found that 40% of divorced female employees think their retirement prospects have worsened as a result of splitting with their partner, compared with 19% of male divorced respondents, and that 16% of divorced women lost access to any pension pot when they split from their partner, with 10% left to rely completely on the state pension.

One education tool that may be useful is cash flow forecasting software. This provides a visual income profile for the duration of an employee’s career and can enable women to pinpoint when they may struggle financially and if they need to save more for retirement. This software also enables career breaks to be factored in, so individuals can clearly see how this will influence their financial future, says Laverty.

The role of the employerThe employer is pivotal in providing pensions education to employees; Aon’s 2016 research found that, when asked about their approach to pensions savings, 43% of respondents said they will do whatever their employer puts in place. Meanwhile Close Brothers Asset Management and the PLSA's research revealed that 58% of employees trust what their employer says about their workplace pension, share plans and other savings tools.

An employer is often viewed as a trusted source to point employees in the right direction. “We need to make more of the workplace," says Stewart. "The workplace is a key area for women to go out and find information. That’s an effective delivery method because [employees] trust their employer; they trust the employer’s making the right decisions for them.”

Employers can play a crucial role in making pensions information accessible and visible for all employees, for example, with the use of an on-site pensions bus on a delegated pensions awareness day. “That’s the kind of really accessible, hands-on, very visible [education] that I think is needed for pensions, particularly for females, because they are time-poor and something that’s very easy and close to hand is a good thing,” says Stewart.

Other ways employers can make pensions information accessible to employees include using online modellers to help staff explore their decision-making choices, as well as providing easily accessible face-to-face support through channels such as Skype or via web chats. Employers could also offer routes to enable employees to meet with independent financial advisors (IFAs), adds Whitney.

If employers do not have their own financial wellbeing provision for staff, then they should signpost information to female employees, such as free government services or financial check lists.

Effectively communicating to female employeesAs research highlights women’s reduced financial confidence compared to men, many female employees may want to make their financial decisions away from the workplace along with family member who could also be impacted by the decision-making process. Employers should bear this in mind when communicating pensions information, adds Whitney. “How [employers] communicate needs to allow people to go to that trusted friend or family member to take the information to them, as well as [the employee receiving the information] themselves, explains Whitney. "I think that socialisation of their decision is even more important for women.”

Although a mix of face-to-face, digital and paper-based channels should be used to communicate to staff, technology, in particular, is crucial, says Hill. “It can make education much easier and delivers the message much more clearly because it can do so in a more interactive way,” he says.

Social media, especially sites or online forums aimed at working parents, is also an effective way of tailoring information to particular employee groups.

Although each employee will have a different retirement savings journey, women appear to face distinct pensions challenges that are affecting their final pension pots. Employers that offer support via pensions education can have a significant impact in helping their female employees reach their retirement goals. As Stewart says: “The pensions education programme is not just about teaching people to do something; it’s about creating that ongoing interaction so that women feel ownership and they feel empowered to make the right decisions about the pension. That could lead them to thinking about broader savings, just getting them into that habit whereby financial confidence and education is the norm rather than a one-off thing that they do every now and then. That’s really important, that consistency and that continual engagement.”

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