How can we design smarter long-term savings propositions for women?

Within the long-term savings industry, not enough focus has been given to women and how they save and invest for their future. This is letting women down and we deserve better. If not, an ever-growing number of women will face poverty in old age.

Before we look at women and long term savings let’s begin by looking at long term savings more generally. If we start with work-based pensions schemes, which are the most common way people save for their pension, the recent requirement that employees are ‘auto-enrolled’ has resulted in over 10 million more people saving for their retirement. This is great news. But despite this, millions of people are still not actively saving for the future outside of their state pension. For example, if we look at young people, 25% of the unemployed are under the age of 25 and the income of the under-30s has declined over recent years, leaving most with less than £100 a month to spend.

So many young people have little chance of saving. But, by far the largest group who are not saving for the future is women. Women in the UK are currently retiring with significantly less money than men. Over 50% of women are heading towards retirement without any private pension savings and 42% of female workers do not think that they get enough salary or workplace benefits to save at all. The reason for this becomes clear when we examine the current situation for many women.

When it comes to work, more women work part-time than men. Figures show that 41% of working women work part-time compared to 13% of working men. This means that it is more likely for these women to fall outside of auto-enrolment and not earn enough to save for the long term. Childcare responsibilities also have a major impact. Women have more time out of the workplace because of caring responsibilities. And this leads to a gap between men and women’s pension income of nearly 40%. And finally, women live on average 3.7 years longer than men. This means that women need around 7% more savings than men.

It is important to consider that this savings gap is not just a result of lack of parity of pay. It is also a result of the fact that there are many more women in low-paid or part-time roles because of childcare and career gaps. The long-term effect of this is that they are paid less and have lower savings. This is a structural issue but I think it’s our role when we are designing services to look at how we mitigate these structural inequalities.

And the impact of COVID-19 will magnify these existing inequalities. With the existing pay and savings imbalances, women are entering this period of uncertainty in a much less robust state than men. For example, in Britain today, 25% of families are headed by a single parent and more than 90 percent of them are women. Under the current lockdown, outside childcare facilities are no longer an option. And this unpaid caring labour will fall more heavily on women. Forecasts are showing that the economy is expected to shrink by 35%. This will inevitably lead to major job losses. Part-time employees are most at risk of losing their livelihood. Again, this will impact women more heavily.

At EY Seren, our research has explored the different ways men and women approach savings to understand how we can design products and services to help women plan for their financial wellbeing. One of the important differences between men and women is that men invest while women save.

Men generally have a greater appetite for risk. They are more driven by performance metrics and they are more independent and impulsive. Whereas women are more risk and debt adverse. They are driven by more holistic financial goals and by non-monetary considerations. And they need more reassurance and coaching through their financial journey.

Women’s financial needs differs substantially from that of men in the following ways. Women are less financially confident than men. Only a third of women feel confident about choosing the right financial product, compared to nearly 50% of men. Women recognise and acknowledge their own lack of understanding when it comes to financial planning. In reality, men and women tend to have the same amount of knowledge but men think they know more while women think they know less. And that’s why women are put off by a lack of knowledge on the part of an IFA, whereas men are put off by fees. Women want to be reassured that their advisor can give them the right advice.

In addition, women often feel spoken down to by their financial advisors. For example, in one survey conducted, 73% of women felt that financial advisors misunderstood them or talked down to them. So, trust is important to women which is why a personal service makes a big difference. Digital tools don’t provide this so we need think about this when designing financial services for women.

So how can we design smarter long-term savings propositions for women? Long term savings offerings should be tailored to a woman’s individual financial situation and their personal goals. We should pivot away from incentivising female customers using performance metrics to a focus on experience and engagement. And we should recognise that women need much more reassurance when it comes to money and finances.

One point to also add here is that there can be gender bias when it comes to designing financial products and services. As Caroline Criado Perez points out in her book “Invisible Women” most products and services are designed with men in mind. This applies to financial services too. Currently, long term savings products tend to focus on performance metrics rather than focusing on more holistic goals which is a key driver for women. We should tackle this as we are designing new products for women and be conscious of any gender bias in our designs.

We need to support women through their financial journey and there are some critical areas where we can help along the journey.

During school/college years, we need to start educating young girls from an early age to become more financially confident and familiar with financial products.
When women are starting to work, we need to strengthen savings incentives to encourage women to start building up emergency savings. This is particularly important when engaging with lower earners and ’gig economy’ workers, where incomes can vary widely and where sudden changes in circumstances can have a significant impact.
When women are starting a family, we should make sure women understand how to maintain their National Insurance Contribution credits during maternity leave and career breaks so that they can continue to save into a pension while they are not working. And we need to ensure workplace pensions schemes are designed for women’s changing circumstances.
With divorce numbers on the increase, we should offer financial advice to women going through a divorce or separation as this can be financially crippling for women. And we need to help women with intergenerational financial planning and make it easier for them to transfer any savings they do have between generations.
And finally, when women are approaching or are at retirement, we should create new propositions that maximise “property as pension” and enable liquidity in retirement, for example, Lifetime Mortgages and Equity Release. And we should also be offering protection and care retirement planning solutions to help women if their retirement provision is affected by ill-health and long-term care.

So, in conclusion, it is true to say that we all struggle to understand long-term savings, but by focusing on women’s needs, the financial journey into retirement can be improved for everyone.

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