The average pension pot of UK employees in large firms is now £120k, a 35% increase on three years ago, according to the new ‘Changing Trends of Financial Wellbeing’ report from Close Brothers. However, outside of pensions, average savings and investments have fallen 3%, and delving into the detail reveals a widening gender savings gap.
The overall average pension savings pot, including all workplace pension schemes (active and inactive), has increased from £89k in 2017 to £120k in 2020. Men have seen an increase of 35%, and whilst women have experienced a higher percentage increase of 38% over that time period, women’s retirement savings still lag significantly behind men’s at £73k compared to £162k, savings parity remains a long way off.
Around a quarter (24%) of UK employees don’t know the total value of their pension savings, and this figure rises to 30% among those 65+ and 35% of those aged 55-64. Even though there may be a higher number of employees with defined benefit pensions in these age groups, as they are in the final countdown to retirement it is worrying, that a third don’t know the value of their pension. 7% of employees have no savings in pensions, a 13% fall since 2017; but again, the gender difference is stark at almost three times as many women as men having no pension (11% compared to 4%). In terms of sectors, those working in consumer goods and services are the most likely to have no savings in pension schemes, at 12%.
In the wake of the coronavirus crisis, we found that 16% of workers are going to reduce the amount they save into their pensions, due to pressures on shorter term needs, despite the risk that this could affect their longer-term financial wellbeing. Female workers, however, are less likely to make this decision (12%) compared to nearly one in five (19%) of their male counterparts. We have yet to understand whether this is just a temporary measure or if it will extend beyond the pandemic.
But the story doesn’t stop at pensions. When asked about the value of their other savings and investments, excluding their primary property, the average saving pot of UK employees comes in at £31k. This is actually a 3% fall on 2017’s £32k average pot, and the detail reveals a stark gender divergence. Men have seen their average saving pot rise 8%, from £36k to £39k in three years. However, in complete contrast, women have seen their savings plummet from a £26k average to just £22k; a 15% fall, and almost half the value of their male counterparts.
The same pattern holds true in those with no savings or investments – just 7% of men have none, compared to 14% of women. Not only has this gap has widened over the past three years, things have improved for men and worsened for women; in 2017, 8% of men and 13% of women reported having no savings or investments.
Broken down by sector, consumer goods and services again comes in at the bottom of the league table, with an average savings and investment pot of £19k. Professional services tops the list at £52k, followed by mining and energy (£48k) and financial services (£42k). When it comes to business size, those with 1001-4999 employees have the highest average pension pot (£129k) and savings (£38k), higher than both those with 201-1000 staff (£105k and £24k) and 5000+ employees (£127k and £32k).
Perhaps unsurprisingly, Londoners have the highest savings (£44k), though those living in the East of England have the highest average pension pot at £174k. Those in the North East report the lowest of each, with a £67k average pension pot and £18k of savings and investment; they’re also the most likely not to know the value of their pension schemes.
Jeanette Makings, Head of Financial Education at Close Brothers said: “While it’s really good news to see the improving pensions landscape, no doubt spurred on by the effects of auto-enrolment and financial education, there is still a significant amount of work to be done to educate employees to balance their savings plans to ensure they can support their lifestyle now, for the future and for retirement. With the stark gender imbalance this is even more urgent for women.
“Understanding the financial health of employees and identifying the key employee groups and financial issues that need most attention is the first step in delivering a tailored financial wellbeing programme that will drive change. And this has never been as important as in the wake of this current crisis. However, from this research, it’s clear that an urgent and common objective for all workplaces must be to better support women to improve their financial health.”