Gender pension gap emerges as new rules take hold

According to the new research by Aegon, although the average pot size has increased across the board, men have saved £73,600 on average, nearly three times the £24,900 held by women.

The Edinburgh-based firm said the gender gap between average pot sizes could be down to more women than men being among this cohort of newly auto-enrolled but modest savers. Meanwhile, men tend to earn more so can better afford extra pension contributions.

Aegon found that 14 per cent of working age people are saving more into their pension as a direct result of the new pension reforms: equating to some 5.5 million people in the UK contributing more to a private or workplace pension.

The pension freedoms have also directly prompted more people to consider their future plans. 15 per cent of people have realised they need to plan more for retirement, up from 10 per cent in April 2016 and the proportion of people engaging with an adviser on their plans for retirement has almost doubled in the last 12 months.

This growing engagement is reflected in people’s financial planning. In April 2015 half of the UK population had taken no steps to review their retirement plans, but positively this has fallen by 15 per cent, to just over a third (36 per cent). In fact, one in five (22 per cent) people have reviewed their plans in the past six months alone.

As people become more active in reviewing the status of their savings, it appears that their overall aspirations for retirement income are also becoming more realistic.

The average annual income people would like in retirement is £32,000, a fall from the £38,000 in April 2016, and lower again than the £41,000 people were hoping to retire on at the time of the pension freedoms.

While these incomes are still some way above the average UK income of £28,200**, and a good deal more than the average pensioner income, it’s encouraging that aspirations are moving in the right direction.

Yet, despite the positive signs, over a third (36 per cent) of people have never engaged with their pension savings. The reasons are varied, one in five people (22 per cent) claim they simply don’t understand how to review their plans for retirement, 15% of people say the lack of online services or information prevents them from checking up on their pension savings and for one in ten people (12 per cent) the main barrier is the fear of seeing how little they have saved.

Steven Cameron, Pensions Director at Aegon said: “People will need to accelerate their saving to reach their retirement destination and make the UK a nation of long term savers. Over a third of the adult population have never taken any action that affects their plans for retirement and these people must be encouraged to engage and save more, or face a very uncertain future. Auto-enrolment does mean many more people have a workplace pension without taking personal action but default contribution levels will only go so far. And there’s a growing issue as more and more people are self-employed and won’t have the benefit of a workplace pension at all.

“We are now firmly in an era of personal responsibility for long term saving. The freedoms bring an increasing number of income choices, while the decline of generous DB pension schemes means that retirement income will be more closely linked to contributions made through life. The challenge is to engage people early enough to give them choice about how they finance their retirement.”