Over Half of Women Are Not Saving for Retirement

8 March 2017  |  Dr. Ella Rabener
Over Half of Women Are Not Saving for Retirement
44 percent of men and women are concerned they won’t have enough money to fund a comfortable retirement.
However, women in particular cite insufficient financial knowledge and a fear of unexpected losses as reasons not to invest in capital markets. We want to encourage more women to start saving for their futures.

As part of our Women’s Initiative, we commissioned YouGov to research the ways in which British and German women are, or are not, saving for their retirement. Here we run through the results.

Our research revealed that the main concern for over 44 percent of both men and women in the UK was not having enough money to fund a comfortable retirement. However, 56 percent of pre-retirement women haven’t yet started saving for their retirement and only 17 percent of women have ever invested in capital markets.

The main concern for over 44 percent of men and women is not having enough money to fund a comfortable retirement.

This is perhaps a reflection of the UK pension gap which stands at £311 billion per year, according to research by Aviva*. This gap means that a 40-year-old has to put aside £4,100 each year to secure an adequate standard of living in retirement. However, 56 percent of the pre-retirement women surveyed haven’t started to save for their retirement, compared to 49 percent of the men surveyed. Both numbers are worrying and point to an issue of tremendous relevance for our entire society.

More than Half of Women Haven’t Started Saving for Retirement

Share of All Pre-Retirement Respondents Asked About Their Retirement Savings*

Share of All Pre-Retirement Respondents Asked About Their Retirement Savings

Source: YouGov, February 2017

Men and Women Are Both Scared of High Losses

Only 17 percent of all women surveyed are currently, or have previously, invested in capital markets, compared to 31 percent of men. We wanted to investigate why women, in particular, are so much less likely to invest in capital markets, as this effectively means they are losing out on long-term growth opportunities.

The most important reason by far turns out to be related to their perception of their own financial knowledge. Almost two-thirds of women (62 percent) said they do not feel sufficiently knowledgeable to be comfortable with investing, compared to less than half (48 percent) of men. A noticeable difference. On the other hand, we couldn’t confirm the frequently-mentioned theory that women are more afraid of unexpectedly high losses than men. We found that only 23 percent of women said this was a barrier to investing, an almost identical figure to the 22 percent of men who responded in the same way.

Almost Two-Thirds of Women Don’t Believe That They Have Sufficient Financial Knowledge

Share of Respondents Who Disagree and Agree That Their Financial Knowledge Is Sufficient*

Share of Respondents Who Disagree and Agree That Their Financial Knowledge Is Sufficient

Source: YouGov, February 2017

Our results did not confirm the preconception that women are more risk-averse than men when it comes to investing. The reasons for the different investment behaviour of men and women are the unequal financial resources at their disposal and the – at least perceived – lack of financial knowledge of women. As a result, women aren’t adequately preparing for their retirement and miss out on the long-term growth potential offered by investing in capital markets. Financial services providers need to better address the needs of women, perhaps by substantially lowering the hurdle for investing in capital markets, for example by offering affordable discretionary services from lower minimums.

Wealth Managers Should Make Investment Risks More Transparent

When asked what would make them more likely to invest in capital markets in the future, most women cited greater transparency around fees and performance, as well as a better understanding of risk, both selected by 17 percent of respondents. Women were less cost-conscious than men, with only 13 percent citing lower fees as a motivation to invest more, compared to 19 percent of men.

“Wealth managers need to help investors better understand investment risk. For example, at Scalable Capital we ask clients to select, in percentage terms, how much they are prepared to lose in a bad year. Our technology-driven approach means every portfolio is customised to the individual risk tolerance of each investor. Portfolios are then adjusted according to risk, ensuring that the risk of the portfolio remains constant in all market conditions, limiting unexpected fluctuations. By providing a professional, transparent, low-cost investment service, we can overcome some of the concerns women have about capital market investments and can help them achieve their financial goals”, said Adam French, Founder & CEO of Scalable Capital.

With an investment minimum of just £10,000, Scalable Capital substantially lowers the bar for discretionary investment management and therefore gives an unprecedented number of women access to a fully managed portfolio, at total a cost of less than 1 percent per year (our management fee is 0.75 percent p.a. and the ETFs we invest into cost on average 0.25 percent p.a., there are no hidden fees).

How Else Can You Support Your Financial Future?

We support PensionBee’s “10-Day Pension Switch” campaign. They are calling for a safer, simpler and more efficient way to manage pensions. At the moment, pension providers can legally keep hold of your money for up to six months, so if you want to switch providers it may not happen quickly! PensionBee are trying to reduce this timeframe down to just ten days.

Note: We re-calculate our average ETF fees on a regular basis to make sure they reflect current portfolio averages. The fees mentioned in this article were accurate at the publication date. To view our current fee structure please visit our fees page.

*Source: https://www.aviva.com/media/upload/Aviva_Mind_the_Gap_2016_Quantifying_the_pension_savings_gap_in_Europe_HJ9aexB.pdf
The YouGov survey was conducted in the UK and Germany in February 2017, with a sample size of more than 2,000 adults in each market. All figures, unless otherwise stated, are from YouGov Plc. Total sample size for the UK was 2,085 adults. Fieldwork was undertaken between 3rd – 6th February 2017. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

Risk Warning – With investment comes risk. The value of your investment can go down as well as up and you may get back less than you invest. Past performance or future projections are not indicative of future performance. We do not provide any investment, legal and/or tax advice. If this website contains information regarding capital markets, financial instruments and/or other topics relevant for investments of assets, the exclusive purpose of this information is to give general guidance on investment management services provided by members of our group. Please note our Risk Warning and the Website Terms.

 

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Photo Ella Turquoise Circle
Dr. Ella Rabener
CMO & UK CO-FOUNDER
Ella combines finance expertise, completing a doctoral degree in business and advising leading financial institutions while working with McKinsey & Company, with several years of experience building e-commerce startups, most recently as founder and CEO of Westwing.ru.