The financial services industry can play lead role in closing gender pensions gap

Record numbers of the UK’s population are set to enter retirement over the next two decades. While this period is often referred to as the ‘Golden Years’, for many, particularly women, all that glitters is not gold – a pension crisis is imminent.

Recent figures indicate that a growing number of individuals are not on track to achieve a ‘minimum’ standard of living in retirement. The cost-of-living crisis is exacerbating the issue, as it forces many to prioritise immediate expenses over saving for the future. This issue is even more pronounced for women, with the gender pensions gap now estimated at around 37.9 per cent, according to Prospect.

This has been years in the making, with multiple factors – such as the gender pay gap, differences in working patterns and longer life expectancies – creating a domino effect that risks the standard of living in later life for millions of women.

The gender pensions gap is estimated to be around 37.9 per cent (Picture: stock.adobe.com)

There is an ever growing imperative for the UK Government to address this issue, which is reflected in a raft of initiatives, alongside an annual measure of the Gender Pensions Gap. However, the pensions industry must also play a significant role in leveraging these initiatives to accelerate change and empower women to secure their financial futures.

Boosting pensions engagement

There are clear differences in how men and women approach finances. Research shows that women are typically more risk averse and prefer to have sound knowledge before taking action.

Initiatives like the upcoming Pensions Dashboard offer a clear opportunity for pension providers to stimulate better engagement with women. Once operational, the dashboard will provide a holistic view of state and private pensions, as well as reuniting lost and forgotten pension pots. As a clear and reliable data source, it will improve understanding of likely retirement income.

Anna Harrigan, Managing Director, Financial Services at Accenture in the UK & Ireland

Providers should already be considering how to maximise the opportunities that increased visibility offers. This will serve as a springboard to build deeper relationships, increase personalisation and encourage actions like consolidating small, high-cost pension pots, that will benefit their customers.

Tackling the advice gap

The number of people accessing retirement advice has historically been low, with high costs associated with financial advice. The government’s Advice-Guidance Boundary Review, designed to increase accessibility of much needed financial support, should create multiple opportunities for providers to change this.

Part of the proposal is to introduce a new, non-advised form of targeted support, allowing firms to guide customers in similar circumstances towards certain products or actions. By investing in this capability, along with enabling technologies like AI, providers can create more meaningful, personalised interactions with their customers.

Firms acting swiftly on these new avenues could help female savers access information sources and support that were previously unavailable. Given the historic lack of engagement observed amongst female savers, a shift towards a more proactive engagement model could be just what’s needed to spark interest. Recommendations based on “people like you” could also counter uncertainty and apprehension.

We’re at the beginning of a multi-year, perhaps even generational, journey to close the Gender Pensions Gap. The pensions industry must act swiftly to leverage new and upcoming initiatives that will enable them to build tools and services that empower customers to engage with and take control of their finances. Doing so could help millions of women across the country avoid pension poverty in the future.

Anna Harrigan, Managing Director, Financial Services at Accenture in the UK & Ireland