Women and Pensions Report. A journey through life and pensions.

Women and Pensions Report. A journey through life and pensions. Scottish Widows Women and Pensions Report October 2013

Foreword. Contents. It s just over a year since the start of the one of the biggest revolutions in workplace pensions saving, with the introduction of automatic enrolment. The early signs are good with fewer than one in ten opting out in the first month after being enrolled. However, there is no room for complacency. Part 1. Deconstructing the savings myths. 6 9 Part 2. Starting out: 18 to 29 years. 10 13 Part 3. Getting established: 30 to 39 years. 14 16 It s against this backdrop that Scottish Widows publishes its ninth annual report on women and pensions. Once again, there is a noticeable gender divide when it comes to retirement saving, with fewer women than men feeling optimistic about retirement. The continued squeeze on the cost of living has made it much harder for many women to consider saving for their retirement and, as in previous years, the gender pay gap has played a significant part in explaining why this is. Indeed, the research in this report shows that women and men who earn similar incomes save similar amounts. However, there are significant differences between how much younger and older women save for their retirement and in their attitudes to saving; and while some of these differences are to be expected others are more surprising. Almost half of young women think the state pension will help ensure they have a reasonable standard of living in retirement compared to around a third of women aged 60 to 64, although quite a high number of (over one in four) 18 to 21-year-olds also want to work beyond the age of 65. And, while women in their 20s believe that they can wait until they are 32 to start saving in a pension, those in their late 60s think it shouldn t be left any later than 29. The current state pension system is complex and confusing, particularly for women, and recent changes to the state pension age have added a further layer of complexity. And for women some in their late 50s, it s also meant they ve had to try and find a way of making up the shortfall until their state pension payments begin. Perhaps it is not surprising that the report shows women across all ages don t expect to retire until they are 66 (although they would prefer to retire four years earlier). The single tier state pension, expected to be introduced in 2016 should, in the longer term, simplify the state pension system. However, this will only provide a base amount to build on. The challenge now is to help women to engage with retirement saving so they feel more confident both about how much they need to set aside to give them the retirement they would like, and about the decisions they need to make in order to achieve this goal. Part 4. Older and wiser: 40 to 59 years. 17 19 Part 5. Approaching and enjoying retirement: 60 years and over. 20 21 Part 6. Moving forward: Recommendations for each age group. 22 24 Sarah Pennells Founder SavvyWoman.co.uk 2 3

Women and Pensions landscape Comparison of men and womens monthly savings (by income) Annual income Male Monthly saving 10k 10,001 to 30k 30,001 to 50,000 > 50k 53 100 224 487 Not counting money you invest in your home or pension, approximately how much are you saving each month for use in your retirement? 30-39 40-49 115 50-59 111 60-64 88 65-69 Gender difference Female Monthly saving 3 20 12 46 50 80 236 441 18-21 22-29 39 84 87 102 70-74 43 75+ 67 Which of the following financial products do you have? Not including any equity that you may have in property and any pension investments, approximately what is the TOTAL VALUE of all your savings and investments? Average is 93 Cash savings account 52% How optimistic are you about retirement? 50% 44% 26% 18% Cash ISA Company pension Personal pension Stocks and shares (not ISA) 35% 18% 10% 25% 7% Very optimistic 19% 4% 22-29 14,164 Single Are you aware of auto-enrolment? 28,146 Married/civil partnership 14,711 Co-habiting 30-39 40-49 50-59 60-64 20% 24% 21% 18% 15% 12,000 Separated (after being married) 22,511 Divorced 30,228 Widowed Yes, and I have been auto-enrolled 17% 13% Stocks and shares ISA Fixed term, fixed rate savings account 11% 11% Optimistic Other 42% 41% 45% 43% Yes, but I have not been auto-enrolled yet 21% 23% 22% 21% 24% No, I am not aware of auto-enrolment 17% 18% 12% 12% 11% Don t know 4 5

Part 1. Deconstructing the savings myths. Gender gap? At first glance, the evidence simply points to women saving less than men across the board. This research found that overall women are saving considerably less than men just 93 a month on average versus 141 among men. Indeed 42% of women aren t saving towards their retirement outside any pensions or property investment compared with 39% of men. However, it s important to explore the factors behind this apparent trend, not least because the difference appears only partly to come down to lower earnings levels. Men and women with similar incomes save similar amounts. In fact, among those with an annual personal income of between 30,000 and 50,000 it is women who save slightly more than men on average 236 a month compared with 224. However, even when income is taken into account women are less likely than men to be saving into a pension. Comparison of men and womens monthly savings (by income) Men had an average of almost 13,000 more saved than women It comes as little surprise that just 30% of women believe they are saving adequately or more than adequately, compared with 41% of men. In fact, men had an average of almost 13,000 more put away than women ( 35,400 compared with 22,500). This gap narrows but doesn t disappear for those with similar incomes. For example, men earning 10,000 to 30,000 have average savings of 30,200 compared to 25,000 for women with the same earnings. When asked why they weren t putting more away regularly, the vast majority of women said they simply couldn t afford to. And when they were pushed to consider what they d cut back on to free up some cash if they had to, women cited going out (49%), and clothing spending (46%), but a comparable number said they would cut down on food and groceries (45%) a far more basic requirement. The realities of everyday life But we also can t and mustn t ignore the different everyday variables that often have a huge effect on men and women s saving potential. The gender pay gap currently stands at almost 25% Care responsibilities regularly take far more women from the workplace than men, for example, which not only reduces or removes their income in the short to medium term, but can have knock-on effects on their earning potential in the future, thus impacting short term savings and the value of both private and state pensions. The stark truth is that the gender pay gap currently stands at almost 25% and is exacerbated by average bonuses among men being twice the value of those offered to women. Those with children may also prioritise other payments over their own savings in order to support or provide for their families. Despite a tendency towards a lower level of consistent disposable income more women loan or give money to their children than men, and more women than men prioritise financially supporting their children over saving into a pension. Nor is this attitude about immediate or finite requirements, as it appears to extend to their approach to financial planning in general. When asked for the main reason people owned a life insurance product for example, 17% of women said it was because they had children versus only 9% of men. The reality in 21st century Britain seems to be that family priorities continue to have a greater impact on women, their income, savings and retirement income than men. The reality in 21st century Britain seems to be that family priorities continue to have a greater impact on women, their income, savings and retirement income than men. Annual income Male Monthly saving 10k 10,001 to 30k 30,001 to 50,000 > 50k 53 100 224 487 Gender difference 3 20 12 46 Female Monthly saving 50 80 236 441 6 7

Education, education, education Alongside the availability of ready cash and the effect of other priorities, a theme of awareness and clarity quickly becomes evident too. Women seem to consider long-term saving more abstractly than men. Not only are men saving more, a greater proportion of them are regular savers; 32% of men save regularly compared with 28% of women. When asked why they would save more in the next 12 months, more than a third of women said I want to save for a rainy day. Far fewer (23%) specifically said they wanted to save more for retirement. Even the reason that four in ten women (40%), gave for starting to save into a pension the general fear of not having enough in retirement is less defined. Which of the following financial products do you have? Cash savings account 52% Men seemed more focused in comparison. The largest percentage of men (34%), say they plan to save more because they expect to earn more. 26% want to save more for retirement versus 23% of women and 23% say their financial priorities were changing versus 18% of women. These findings seem to suggest that men have a greater tendency to look to the long-term and are less likely than women to focus on short to medium-term specific saving targets. Indeed 10% of men versus 6% of women plan to save more because longer-term investments generally have better returns. Men are also more likely to use complex savings and investment vehicles than women such as stocks and shares (including ISAs), and personal pensions. The data indicates men may be more confident in their understanding of products and the wider market. More than a third of men (35%) compared with only 27% of women say they invest in a stocks and shares ISA because they expect a better rate of return than cash and 10% of men say they preferred their pension to be invested to produce the best possible returns, despite the risks of losing out if stock markets fell. Only half as many women (5%) agree. 44% 18% 50% 26% 17% 13% Cash ISA Company pension Personal pension Stocks and shares (not ISA) Stocks and shares ISA Fixed term, fixed rate savings account 18% 11% 11% 10% 35% While exactly the same proportion (53%) of both men and women say they haven t saved into a private pension because they didn t have any spare money, just 7% of men say it was because they didn t understand pensions, versus a far higher 15% of women. More than half of men (53%) know what an annuity is compared with 41% of women and almost twice the proportion of women compared with men don t know what type of private pension they have (24% vs 13%). Women aren t only uncertain about their own activities when it comes to money and saving either. Of those with a Defined Contribution pension scheme, for example, more than half () are unsure of how much their employer contributes, compared with a much lower 38% of men. As we might expect, there is a significant difference of 10% between the proportion of men and women who don t know whether they will have enough money in retirement. And by the time they retire, 41% of women have realised they didn t prepare adequately compared with only 24% of men. Dig deeper though, and British women s attitudes to planning for life and retirement vary in significant and sometimes unexpected ways as this research spanning the Post WWII generation, Baby Boomers, the 80s generation born in the golden age of the Yuppie, and the new wave of austerity adults has found. British women s attitudes to planning for life and retirement vary in significant and sometimes unexpected ways 8 9

Part 2. Starting out: 18 to 29 years. More than half this group of women felt they weren t preparing adequately for older age, Taking all this into account, it s not a great surprise that this group saves the least for older age of all the generations. More than half of female 18 to 21 year olds () and 40% of 22 to 29 year olds are saving nothing outside of any existing pension or property investment and for those who do, the average comes down to just 39 a month for 18 to 21 year olds and 83 for 22 to 29 year olds. By their thirties, this has barely changed. Although more than half this group of women felt they weren t preparing adequately for older age, 33%of 18 to 21 year olds have no idea if they are or not. Alongside other, more pressing financial priorities that bring an immediate benefit like buying a property this seeming lack of awareness when it comes to the realities of retirement could also play a small part in the reasons their precious little disposable income is often spent elsewhere. But taking so much change and development on board in this period means there s little time and even less incentive for either sex to prioritise long-term financial planning. Around 30% of 18 to 21 year olds and 22% of 22 to 29 year olds say they aren t saving into a private pension because they didn t understand them and a huge 96% of 18 to 21 year old women and 83% of 22 to 29 year old women don t know what an annuity is, compared with an average 59% of women in general. Among men the figures are better, suggesting that men in general are more informed, but the age-based trend is the same with 88% of 18 to 21 year olds and 70% of 22 to 29 year old men unsure about the definition of an annuity compared with an average 47% of men of all ages. Unfortunately, a good saving habit would make the most difference for the generation least likely to have one. But there s a lot going on for the standard 18 to 29 year old. Life is, understandably, about today, not forty years from today, and that s unlikely to change. A good saving habit would make the most difference for the generation least likely to have one. Combining those in full-time education and those newly working it s unsurprising that, when it comes to financial priorities, this group is far more focused than others on more immediately demanding elements of real life. While the wider UK jobs market is starting to improve, youth unemployment figures continue to rise with almost 1 million 16 to 24 year olds out of work and not in full time education. Those who have landed a job often face starting salaries significantly lower than the average national wage of 26,600, and all while trying to pay off an average student debt of 43,500, cover basic living costs and, finally, attempt to save a deposit for their first home. In fact, some suggest that 85% of student loans won t even be repaid because the graduate simply won t be able to pay it off in the 30 year timeframe. Not counting money you invest in your home or pension, approximately how much are you saving each month for use in your retirement? 18-21 22-29 39 84 30-39 87 40-49 115 50-59 111 Average is 93 60-64 88 65-69 102 70-74 43 75+ 67 10 11

One thing young women do know is that if they want information about pensions, they ll probably turn to an independent financial adviser 50% of 18 to 21 year olds, and 38% of 22 to 29 year olds compared with 26% of the female population. Just 8% of 18 to 21 year olds and 14% of 22 to 29 year olds would ask family or friends, against 24% of all women. But despite the assumption that this web savvy generation is more reliant and attuned to online sources, they are actually less inclined to seek advice from online aggregators, the FCA website, or to take advantage of the impartial assistance offered by the Money Advice Service. Meanwhile, working life has some interesting effects on evolving attitudes towards saving for retirement. Women aged 18 to 21 (of whom almost three quarters were still in full-time education) say they were happy to wait for retirement until they were more than 63½, compared with a typical expectation of under 62. This is largely because over a quarter (28%) say they would like to work beyond the age of 65, compared with just 15% overall. Once they ve worked for a few years, the 22 to 29 year olds have a greater desire for earlier retirement, with an average age of just over 61 years. If they had to, the youngest women would be prepared to work until they were almost 68 For this generation of 18 to 29 year olds, the anticipated source of their retirement support is surprising. Despite being the generation that has come of age in a long period of austerity, witnessing the effects of public sector funding cuts as well as huge unemployment problems for their age group, the 18 to 29s have more faith that a state pension will help ensure they have a reasonable standard of living (46% compared with 34% of the general female population). Nor do they feel as strongly as the other age groups that in future, individuals in the UK will be required to take more personal responsibility for their financial security in retirement. Just 57% of 18 to 21 year olds feel the individual will need to shoulder more of the burden, significantly lower than the 83% of women aged 65 to 69. Meanwhile, the chances of them being on the housing ladder in the foreseeable future may be limited, but 35% of 18 to 21 year olds and 26% of 22 to 29 year olds think downsizing, selling or renting property will help provide for them in older age. This age group faces many challenges but also the time and opportunity to secure their financial future This age group faces many challenges but also the time and opportunity to secure their financial future. While some hope rests on automatic enrolment to offer part of the solution, the industry as a whole has a responsibility to educate consumers of this generation to ensure they truly understand the value of saving adequately to meet Attitudes towards pensions amongst women aged: 18 to 21 years 4 out of 5 Don t have a pension scheme a third Attitudes towards pensions amongst women aged: 22 to 29 years HALF Don t have a pension scheme Think downsizing, renting or selling property will help them fund their older age a third Don t know what an annuity is 83% Saving nothing outside existing pension or property investment 1 in 5 Aren t saving for a pension because they don t understand them their expectations not least because of the difference such a shift in attitude at this age could have for later life. Illustrating the real effects of retirement savings habits in everyday lifestyle terms from food shopping or utilities affordability to the likelihood of foreign travel, for example, could help rally young women into positive action. Average age they would aspire to retire 631/ 2 Average age they would aspire to 61 retire If they had to, the youngest women would be prepared to work until they were almost 68, compared with 66 for the 22 to 29 year olds, which is just under the overall average. This later anticipated retirement age could also reflect their desire for an annual household income of 28,200 at age 70 to feel comfortable. Once again though, with real life and a grip on real working incomes kicking in, the 22 to 29 year olds revise their expectations down to 23,800 lower than the average 24,400. Compared with 37% of all women, 81% of 18 to 21 year olds and an improving 54% of 22 to 29 year olds don t have a pension scheme. For now at least, these groups don t expect to start saving into one for more than five years and more than four years respectively. 12 13

Part 3. Getting established: 30 to 39 years. It would be wrong to assume that women who are saving the least are those with young children The data suggests other knock-on effects for women who find themselves as part of a team working to financially support and care for a family together after a period of independent living. 21% of 30 to 39 year olds were expecting to rely on their partner s income for a decent standard of living in retirement. Only 40 to 49 year olds had a greater expectation of support at 24%. But it was even an important factor for 17% of 22 to 29 year olds. For many, a woman s 30s is the point at which the importance of the work/life balance really comes to the fore. Only 50% work full time compared with 81% of men of the same age. After the short-term goals of 20-something women that revolved around the transition to self-sufficient adulthood, much of this age group has shifted their financial priorities from themselves to their families without stopping in between to deal with their own long-term personal financial planning. But they have also refocused their priorities to a greater extent than their male peers (a trend we ve already noted among women of all age groups). At this age, around 19% say they have prioritised financially supporting their children above saving for retirement compared with 14% of 30-something men. For those in work, it s important to bear in mind that this is the age when the gross annual salaries of men and women begin to diverge significantly, with 30-something women bringing in an average gross income of 19,200 and 30-something men earning 28,700. It comes as little surprise that these women only save 87 a month towards retirement on average, compared with 151 among their male counterparts. However, employment sector as well as income may also have a bearing. We might expect the typical female working in retail or hospitality to earn less than those in financial services for example. Indeed 37% of those working in retail and 36% in hospitality make no savings at all outside existing pensions and property, compared with 25% of financial services employees who, it could be argued, may also have greater awareness of retirement funding challenges and opportunities because they work in the relevant sector. But it would be wrong to assume that among women who are saving the least are those with young children who generally aren t working full time and for whom other, more immediate financial needs, are of higher priority. In fact the opposite is true. Women with no dependents are putting away just 83 on average every month compared with those with 1 to 3 dependents who save 113. Even in households with 4 or more dependents, that average only drops a little to 103. Enjoying the highest combined household income of any female demographic, married women of all ages save the most by far at an average of 123 a month. They put far more into their pensions and their total savings and investments are worth significantly more than single, separated and divorced women with lower single earner household incomes and more immediate financial pressures associated with simply making ends meet. (It doesn t, however, explain the significant discrepancy between the amount saved by married women and cohabiting women who put only half as much just 62 away a month.) Perhaps this higher combined household income explains why married women have higher retirement aspirations, why they expect to retire earliest, why 59% are either optimistic or neutral about their financial circumstances in retirement and why they cited the highest gross household income they would aspire to in order to feel comfortable at aged 70. The same trend was evident among men. It s clear that this generation with its trend towards greater saving but still with a few decades to go before retirement is better placed financially and psychologically to engage with retirement planning and pension schemes. But more 30-somethings than 20-somethings are not fully aware of the type of private pension scheme they have (29% against 24%). Nor are they much better informed about whether they are or aren t contributing to one in the first place (38% of 30-somethings didn t know compared with 41% of 20-somethings). Despite this, 70% of 30-something women, the highest of all the age groups, feel that employers should both provide a scheme and contribute to it. Women in their thirties are very keen on auto enrolment and once in are keen to stay enrolled. The good news is that this age group has been positively affected by automatic enrolment. 24%, the largest of any age group, was already enrolled by the end of February 2013 the majority through their existing company scheme. Women in their thirties are very keen on the concept of auto enrolment, and those who are in and know it are highly likely to stay enrolled. 14 15

Are you aware of auto-enrolment? 22-29 30-39 40-49 50-59 60-64 Part 4. Older and wiser: 40 to 59 years. 20% 24% 21% 18% 15% Yes, and I have been auto-enrolled 42% 41% 45% 43% Yes, but I have not been auto-enrolled yet 21% 23% 22% 21% 24% No, I am not aware of auto-enrolment 17% 18% 12% 12% 11% Don t know The knowledge gap still persists though, with 35% unsure or unaware of automatic enrolment or how it affects them. Just under a third don t know what effect the minimum auto enrolment contribution would have on their financial security in older age the highest percentage of any generation. And almost 40% have no idea how their retirement income in general will match up with their income today. British women in their thirties may have found that life has changed beyond all recognition since early adulthood, but new demands such as juggling a family life and career mean that in many cases they have been forced to deprioritise saving for retirement to make way for other financial priorities. Attitudes towards pensions amongst women aged: 30 to 39 years Average income 19.2K Didn t know if they were contributing to a pension scheme 2 fifths 87 Average monthly saving Prioritised supporting their children above retirement saving 19% 1in5 Are expecting to rely on their partners income in retirement 3in10 Not fully aware of their type of private pension scheme With their attention elsewhere, it has never been so important for the financial services industry, employers and the government to raise awareness and build real world support around women trying in turn to support others. This could include tailoring pensions advice to acknowledge and function in terms of the priorities of new parents or those caring for others, for example. Offering specific, practical steps to alter habits in order to build up both their retirement funds and understanding of the subject, products and services, and their own circumstances could make all the difference. 1 2 in work full time 35% Unsure of how auto-enrolment affects them By their 40s, women appear to have begun to prioritise savings, investments and retirement, perhaps unsurprisingly given their personal wealth has improved dramatically and retirement is edging ever closer. They are commanding the highest gross personal income, at an average of 19,800 for 40 to 49 year olds and 18,700 for 50-59 years old, and are contributing to similarly high household incomes. Indeed 50 to 59 year old women are sitting on 28,300 in typical savings and investments. For this group in particular, the relationship between working life, employment and their upcoming retirement is becoming real. Not only are they more likely to consider the quality of their employer s pension scheme a major incentive to stay with them, but more think increased employer contributions an important reason to stay. With 62% of all women believing automatic enrolment is a good thing, this group contributes more into such a scheme than any other age group and are better informed about the basics of the pensions landscape. Meanwhile, a lack of trust has less of an impact on savings habits for this group than some younger women and many feel that a company pension scheme, alongside their cash savings, will play a significant part in helping them realise a comfortable retirement more so than a state pension whose starting age seems to slip further away the closer to it these women get. 16 17

But this is also the sandwich generation supporting dependent children as well as looking after their ageing parents. Some 23% of 40 to 49 year olds and 21% of 50-59 year olds say they have prioritised financially supporting their children over retirement saving in the last five years, and for those facing separation and divorce, affordability can present a significant problem. Paying off debt is a greater priority than retirement saving for 34% of 40 to 49 year olds and 24% of 50 to 59 year olds. Meanwhile, 66% of the 40 to 49 year olds who aren t members of a private pension scheme say it is because they don t have the spare cash the largest proportion for any age group. The vast majority of divorcees say that pension arrangements weren t discussed as part of the settlement leaving them unsure of their entitlements Bearing in mind that almost one in five British women in general (19%), 24% of 40 to 49 year olds and 19% of 50 to 59 year olds expect their partner s income to help support them in retirement, the vast majority of divorcees say that pension arrangements weren t discussed as part of the settlement leaving them unsure of their entitlements. 77% also don t know what their partner would be entitled to from their own pension fund if they were to separate, despite the legal obligation to disclose this information. Setting aside the considerable emotional trauma involved when a long term relationship breaks up, this kind of life event represents one of the most significant information black holes in modern British life, and not just for women. Financial advisers should encourage cohabiting and married couples to become jointly responsible for and aware of financial planning, including their combined worth and retirement entitlements, not only to encourage female engagement but also to help mitigate the potentially severe monetary effects of separation. Meanwhile, with 30% of this age group going to friends and family for financial advice the highest percentage of any age group the results also suggest the more traditional roles in managing a family s finances endure for this age group. With the likelihood that this age group is consulting those around them of a similar age, one of the other major challenges for the industry, employers and government is to ensure that they, and those around them, have kept up with the pace of change in the retirement and wider financial landscape to avoid the potentially negative consequences of the wrong advice at a critical time. Attitudes towards pensions amongst women aged: 40 to 49 years Average income 19.8K Attitudes towards pensions amongst women aged: 50 to 59 years 28.3K Average savings and investments a third consider paying off debt a bigger priority than saving for retirement Average income 18.7K If separated do not know what their partner would be entitled to 79% 72% If separated do not know what their partner would be entitled to 1in4 Expect their partner s income to help support them in retirement Prioritised supporting their children financially over saving for retirement 21% Not including any equity that you may have in property and any pension investments, approximately what is the TOTAL VALUE of all your savings and investments? 14,164 Single 28,146 Married/civil partnership 14,711 Co-habiting 12,000 Separated (after being married) 22,511 Divorced 30,228 Widowed 18 19

Part 5. Approaching and enjoying retirement: 60 years and over. The simple fact is that women want to retire earlier but are living longer. On average women would like to retire by 62 but realistically expect to stop work just after their 66th birthday. They are only prepared to work for a few months after that but if they did have to, almost half would be prepared to do the same job with fewer hours and around a third would consider a different, less stressful role. For a quarter, the same job with fewer responsibilities might also work. This age group has significant savings ( 41,200 for 60 to 64 year olds, and 45,900 for 65 to 69 year olds) and considering that around half of those aged 60 and over don t have an employer pension, they expect those savings to play a big part in ensuring they have an adequate retirement income. Around 43% of women in their early 60s feel they are at least adequately prepared for retirement compared with only 30% of the broader female population. But the older women get, the younger they think they should start planning. While 20-somethings think they should start saving just before they turn 32, by their late 60s women believe people should become engaged with retirement provision just before their 29th birthday. (Curiously, the difference is greater among men. Late teenagers cite almost 35 as the age to start saving, falling to 31 among 20-something males and dropping right down to 27 for men in their late 60s. It may once again indicate that men are more engaged with the realities of retirement saving.) The expectation for many during their working life was that the state pension would offer an acceptable if not comfortable retirement income Women also feel a little more strongly that the government should take more responsibility for retirement with 32% of 60 to 64 year olds continuing to believe that the state pension will help give them a reasonable standard of living. This is the core Baby Boomer generation that grew up in the bosom of the welfare state. The expectation for many during their working life was that the state pension would offer an acceptable if not comfortable retirement income. The generations around them, it could be argued, have entirely different experiences. Yet again the issue of knowledge is a critical one for this generation. Even at this crucial time, 37% of 60 to 64 year olds and 32% of 65 to 69 year olds still don t know what an annuity is. Of those women who did buy one, 33% did not shop around for the best rate, despite a dynamic climate in which new retirees are battling historically low rates at the same time that new EU gender neutrality rules mean annuity rates can no longer be calculated on sex (a positive for women who tend to live longer than men). Once they had retired, 36% of women found their retirement income was less than they expected. So it comes as a bit of a surprise that of those who have an annuity, three quarters of 60-somethings felt they were fully informed of their options at retirement, up from a still surprising 44% of the general female population. These figures are even more surprising considering that they are higher than for men, of whom just 55% of 60 to 64 year olds were as confident. In fact, they seem to directly conflict with the fact that a third or more of the women at the end of their working life haven t even thought about how they would secure the best type of annuity for their needs. Such a confused picture points to a real lack of understanding. With such evidence to suggest that even on the point of retirement many women aren t equipped with the awareness and information necessary to assist them during this critical transition, a huge opportunity exists for the financial services industry to improve the provision of education in order to support women through one of life s most important events. Attitudes towards pensions amongst women aged: 60 to 64 years 1 in 3 Think the state pension will help give them a reasonable standard of living 37% Average savings and investments 41.2K Attitudes towards pensions amongst women aged: 65 to 69 years Think they are at least adequately preparing for retirement Average savings and investments 45.9K Don t know what an annuity is 43% Think they are at least adequately preparing for retirement 2 in 5 Think the state pension will help give them a reasonable standard of living a third of retired women found their income to be less than they expected 20 21

Part 6. Moving forward. Recommendations for each age group. We must give women the full range of tools to precisely determine what they want from their retirement and empower them to go out there and secure that future. A pension shortfall is an outcome that women seem almost resigned to. If women do engage with pensions at all, they rapidly conclude they haven t saved enough, cant save any more, and that traditional sources of support no longer exist. This leads to the conclusion that women will have to live out their old age in discomfort It is disheartening to say the least, particularly when an informed series of choices throughout women s lives could make a huge difference to retirement reality. Due to circumstances that often take them away from the workplace and sources of formal advice, women of all ages are consistently missing out on important retirement saving information and the opportunities available to them via pension schemes. But with light at the end of an economic tunnel and improving market data, automatic enrolment, and gender neutrality changes, there s an immediate opportunity for all those invested in the circumstances women face in retirement to drive education, advice provision, the importance of personal engagement, responsibility and pro-activity whatever the generation. Such action would allow women to take informed decisions, to fully appreciate their own responsibilities and to acknowledge the direct link between savings behaviour today and the reality each woman is creating her own future. Setting arbitrary, abstract figures and impersonal, non-targeted information that is consistently failing to get through, the industry, employers and the government must understand the unique circumstances faced by modern women and work harder to take these circumstances into consideration when designing advice delivery policies. As we have identified in this report, the needs and potential solutions change with age. Age 18-29 This is the age when financial habits are formed, but is also the age when women have the least inclination and the least ability to save for later life. Important advice to be aware of at this age includes: Take control of your finances. Women are often less knowledgeable and less confident than men when it comes to finance, but if they can understand the importance of financial literacy they can set themselves savings goals. Resources available to help with this include the Money Advice Service website Managing your money section and The Pensions Advisory Service s leaflet Pensions A guide for women. Get into the savings habit. Initially the priority may be to get on the housing ladder rather than to prepare for retirement, but those who learn the value of saving early on are more likely to continue later. Join your employer s pension scheme. Women are generally positive about automatic enrolment, and need to be told clearly that it pays to stay in even if that means lower disposable income and/ or combining debt and savings (as long as borrowing is under control). Age 30-39 If women have not started saving seriously for retirement when they are in their thirties, they are leaving it too late. Take advantage of your employer s pension, and make sure you understand it. There is a surprising level of ignorance among women in their thirties about their pension arrangements, which suggests they have not engaged sufficiently with them. All being well, they should see steady growth in their pension fund into a very worthwhile amount an opportunity deserving of their attention. Plan for your retirement, even if you haven t settled down yet. Almost half (45%) of women in their thirties are either single or cohabiting. For many this may be a long-term choice or reality, but others appear to be deferring settling into family life, and also taking financial responsibility. Despite aboveaverage income, cohabiting women are saving much less than their married counterparts. Be bold. Women are much less likely than men to invest in equity-based vehicles, but in their thirties there is plenty of time for market peaks and troughs to even out before they retire. They need to invest boldly to maximise returns. 22 23

Age 40-59 This is the age when finances generally are likely to be most healthy, particularly once any children have grown up, and there is the opportunity to do serious saving for retirement. Prioritise yourself, as well as your family. Much more than men, women are likely to put the needs of their children (and sometimes their parents) ahead of their own. It s important that they strike a balance and ensure they are preparing for their retirement as well as their family s future. Increase pension contributions. At this stage, putting as much as possible aside for retirement is vital, and the minimum payment into an employer s pensions is unlikely to be enough. Many employers operate matching arrangements, where higher employee contributions also lead to higher employer contributions. Scottish Widows suggests saving at least 1 a month for retirement out of every 100 a year of earnings (12%), including employer contributions, and by this age that should be seen as an absolute minimum. Know your rights. The fact that pensions appear to be largely ignored in divorce settlements is shocking, and women are likely to lose out heavily as a result. Age 60+ Successfully managing the transition into retirement can make a huge difference to the rest of a woman s life. Take stock. A few years before they hope to retire, women should take stock of their financial provision (and their partner s, if relevant). Is it enough to give them a reasonable living standard? Get a pension forecast from the Government and projections from all your private pensions. Consider the value of other savings, and of your home if necessary. Plan the transition. It will become increasingly uncommon for retirement to be a single event, and for many it will involve a move to part-time work or less stressful employment. Fortunately, older women seem sympathetic to this. For any women reaching age 60 after 5 December 2013, their state pension won t begin until after they are 65, and they need to see this as a benchmark for when they might stop work. Understand your options. Even among those at the point of retirement, knowledge of annuities and other options appears very low. Insurance companies, and some pension schemes, have taken steps to dramatically improve the quality of preretirement communications and to prompt consideration of the open market option. Those retiring must be fully aware of their options, including the possibility of enhanced annuities.

Scottish Widows plc. Registered in Scotland No. 199549. Registered Office in the United Kingdom at 69 Morrison Street, Edinburgh EH3 8YF. Telephone: 0845 608 0371. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 191517 (www.fca.org.uk/firms/systems-reporting/register). 47936 10/13