Just a fifth of women in the UK are aware that their pension savings are invested in the stock market, a new survey has revealed.
While a higher proportion of men surveyed understood their pension was in the stock market, that still leaves a staggering 69 per cent of the country’s workers ignorant as to how their workplace scheme works.
Those who thought it wasn’t invested were asked what they thought happened to their cash. The most common answer was that they had ‘no idea’ – followed by a belief that it ‘may be invested’ after all.
Do you know where your retirement savings are? Just 22 per cent of women understand their workplace or personal pension is invested in the stock market
The next most common answers were that the money went into a savings account, was set aside some unspecified ‘safe’ place and that it grew in an ‘unspecified way’.
Many believed the government is involved in managing their money.
But perhaps most worryingly, there were a significant number who answered that they believed their pension savings to be invested in ‘something nefarious’.
This included being ‘ripped off’ and ‘people gambling with the cash’. Many also thought that their employer ‘used the cash’.
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Sarah Coles, personal finance analyst at Hargreaves Lansdown, says: ‘Most people are completely in the dark when it comes to pensions, and women are most likely to be blindly staggering towards an uncertain retirement.
‘It’s not your fault if pensions remain a bit of a mystery. Nobody taught you the basics: you were just supposed to pick it up through some kind of weird pension osmosis.
‘The problem is that if you don’t get your head around pensions, you could pay a terrible price for it in retirement.’
The survey of 2,000 Britons was conducted for Hargreaves in April this year by Opinium.
Maike Currie, investment director at Fidelity International, says that financial inequality at retirement is one of the ‘greatest challenges facing women today’.
‘We live longer, earn less and are more likely to take career breaks to raise children or care for elderly relatives, making it increasingly more difficult to close the gender pension gap of almost 11 per cent,’ she adds.
Fidelity recently conducted a series of research projects looking at women and money. Its latest report, the Financial Power of Women, also found other barriers stopping women from investing included salary limitations, household costs and chores, and a lack of understanding about the choices available to them.
|My pension is invested in the stock market||31%||22%||40%|
|I have a clear idea of how much all my pensions are worth||36%||28%||45%|
|I have a clear idea of my retirement options||31%||24%||38%|
|I have a clear idea of how much income I’ll need in retirement||29%||23%||36%|
|I am confident I can afford to retire||31%||23%||38%|
|Source: Opinium Research for Hargreaves Lansdown, April 2020|
‘This underpins the fact that the gender pay gap is still a factor holding women back from taking more risk with their earnings earlier on in life,’ Currie adds.
‘However, we found that women could close the gender pension gap by dedicating an additional 1 per cent of their salary towards their pension early on in their careers – an average of just £35 per month in contributions over 39 years.
‘It’s vital they feel informed and confident in making these financial decisions, in order to support their retirement needs in the future.’
Both sets of figures add to a long list of surveys and research findings to confirm a shocking lack of understanding and engagement among the UK’s workforce with their pensions.
Analysis: Make your money matter now
The truth is that when today’s younger workers come to retire, there is a real possibility there won’t be a state pension to fall back on.
Fortunately, most of the UK’s employees are now enrolled in some sort of workplace scheme.
There is still a worrying shortfall in pension savings among the self-employed, and a lack of understanding as to how much money we will need later in life.
How you invest your pension can be empowering, and it doesn’t have to be solely about numbers.
You can find out more about film director Richard Curtis’ new campaign Make My Money Matter.
Disinterest is highest among women, highlighting an entrenched and worrying social problem brewing in the UK.
‘While there are big gaps in our pension knowledge, women face even larger gaps than men,’ said Coles.
‘This may be because they have smaller pensions. We see a tipping point of people engaging with their pension pot when they have around £5,000 saved for the future, and because men are on higher salaries on average and take fewer career breaks, they reach this level more quickly.’
Emilie Bellet, founder of women’s investment network Vestpod, believes that most people never received the financial education they needed and, as a result, she says: ‘We lack the confidence in both talking about and managing our money.
‘We often feel most lost when it comes to managing pensions.’
She adds: ‘Women are disproportionately affected because they tend to earn less, due to the gender pay gap and also often due to the fact that they take longer career breaks to be the primary carers for their families, yet they live longer than men but don’t invest their money nearly as much.
‘It’s vital that we take concrete steps to get people to understand how pensions and other investment products work to ensure that they start saving and investing to have enough money for when they need it most. ‘
HOW TO TAKE CONTROL OF YOUR PENSION SAVINGS
The only way to make sure your pensions are on track is to get to grips with the mechanics of how they work, counsels Sarah Coles at Hargreaves Lansdown.
You can then use an online pension calculator to check where you are, and what you need to do to secure the retirement you want.
You should also try to make active decisions about how your pensions are invested, and ensure they reflect your priorities and risk tolerance.
‘Alternatively, given the amount of money involved and what’s at stake, this could be one of the times in life when it’s worth considering getting some advice,’ added Coles.
‘The good news is that getting back on track can be easier than you think.
‘A combination of upping monthly contributions, changing your investment strategy or tweaking your retirement plans, can undo the damage and secure the retirement you deserve.’
Five steps to invest your pension
By Sarah Coles, Hargreaves Lansdown
How you invest your pension will affect the sort of financial help you can offer your children later in life (stock image)
1. Don’t be afraid to admit you don’t know
2. If it’s a workplace pension, speak to your employer
They will be able to tell you about your company pension and should have booklets to take you through how it works. If working your way through a booklet doesn’t appeal, ask for a meeting where someone can explain it properly for you.
3. Check what you’re invested in
If you don’t know where you’re invested, the chances are you’ll be in your scheme’s default fund – because this is where you end up if you haven’t made an active investment choice.
Ask for a copy of the default fund factsheet, which will show you the charges you’re paying, and how the investments have grown compared to the average of similar funds.
4. Work out if your investments are right for you
In a default fund, you’ll probably have around two thirds of your pension invested in shares, which give you the best chance of growing your money, with the remainder in bonds and cash which tend to fluctuate in value less.
If you’re under 40 you can consider having a larger proportion of your pension invested in shares. Most pensions will give you some alternative options, so ask for details or take advice to get the right investments for you.
5. Set a date to review your handiwork
Before you reward yourself for taking some positive steps, set a date in your diary to check your progress – it’s a good habit to check in at least once a year.
When you do, check how the funds are doing and if they are still right for your circumstances.