Women in particular need more financial advice and education according to the OECD’s Pensions Outlook report, finds Maggie Williams
Greater personal responsibility for pension savings is driving an increased need for financial advice and education with women in particular need of support, according to two reports released this month.
The Organization for Economic Cooperation and Development’s (OECD) Pensions Outlook report researched retirement savings trends across 35 countries, finding that low financial literacy “poses serious challenges”.
“While there is scope for simplifying pension products and designing appropriate defaults,” said Chiara Monticone, policy analyst, OECD Financial Affairs Division, “financial education still has an important role to play.”
Women, as well as young savers, the self-employed and those approaching retirement were identified by the OECD as having particularly acute financial education needs.
Financial education still has an important role to play.
A separate report released by the Chartered Institute of Insurance (CII) this week, also highlighted the disparity between women’s savings, level of financial awareness, and their needs in retirement. Women’s Risks in Life, a report by the CII’s Insuring Women’s Futures (IWF) working group, draws together data from a number of sources to paint a bleak picture of women’s financial wellbeing.
It backs up the OECD’s report findings that women “typically earn less over their lifetimes than men, have longer life expectancy and are consistently found to have lower financial knowledge and lower confidence in their financial abilities than men.”
In particular, the CII’s report identifies the differences between women’s pension savings and their financial needs, should they require care in later life. A woman aged 65 can expect to have to fund 10 months of home care and 12-13 months of residential care at the end of her life, with 1 in 10 women racking up a care bill of £113,000. The average total pension pot for a woman in her early sixties is £36,000.
Jane Portas, IWF Committee lead on Women’s Risks in Life and PwC Partner said: “While women are increasingly better educated, they earn less, feel less financially secure, provide the bulk of unpaid care, have smaller pensions, face greater hardship in life and struggle to pay for their own care.”
To address financial literacy problems for savers, the OECD called for all countries to develop a national strategy for financial education, provide training in relevant skills, standardise pensions information and provide unbiased advice. Pablo Antolin, principle economist and head of the private pensions unit said that the OECD “view financial education as an essential component of retirement policies.”
The CII will create an industry task force focused on encouraging and empowering women to protect themselves against the types of financial and personal risk outlined in the report.
Poor preparation for retirement is a problem for all savers, with women suffering particularly acute difficulties. The evidence gathered by both the OECD and the CII is clear, but the financial, attitudinal and social shifts required to drive genuine change may be hard to enact. Better financial education won’t provide the whole solution – but it is a start.