Minding the pension gender gap

Female employees are saving less than their male counterparts

Research has become an indispensable tool in the retirement savings business as we seek new insights to help plan members and employers create better retirement outcomes. And the research can occasionally yield unexpected results.

One of the biggest surprises is the difference between men and women in terms of saving for retirement. From savings expectations to financial knowledge to total account balances, there is a significant gap between the sexes, with men demonstrating better behaviours on all counts, according to Sun Life research.

These numbers are even more surprising considering female employment and education has been steadily rising for some time. The 8.1 million women working in 2009 (58.3 per cent of women) represented more than double the number of women employed in 1976, according to Statistics Canada. And, as of 2011, more than 59 per cent of all university degree holders aged 25 to 34 were women.

While there can be a number of reasons for a gender retirement savings gap, plan sponsors may want to consider a deeper look at their own plans to determine if other factors are at play.

This past year, Sun Life undertook a detailed analysis of capital accumulation plans in Canada, with data drawn from more than 5,200 plans and more than one million plan members.

In looking at whether there were differences in account balances and contributions between men and women, the results were startling: Men have average and median balances that are 40 to 45 per cent higher than those of women — and average and median contributions that are 31 to 49 per cent higher.

In addition, a separate study conducted by Sun Life Financial showed that when employees are leaving employer-matching contributions on the table, two-thirds are likely to be female.

While these differences are closing slowly — the average account balance for women is growing at a slightly faster rate than that of men — the gap remains significant.

Some of the differences in account balances and contributions can be attributed to the fact that the average wage for women trails that of men. (It’s about 70 per cent of male full-time wages, according to Statistics Canada.)

But there may be other factors at play. A 2013 Sun Life survey about retirement education revealed a significant knowledge difference between men and women. When asked in which areas people lack sufficient knowledge to help with retirement planning, the top three results were:

•51.5 per cent of women said they lack sufficient knowledge about how much retirement income they would need (versus 40.5 per cent of men).

•43 per cent of women said they lack sufficient knowledge about how taxes affect retirement savings/income (versus 36 per cent of men).

•37 per cent of women said they lack sufficient knowledge about government programs (such as Canada Pension Plan, Quebec Pension Plan and Old Age Security), versus 31 per cent of men.

In addition, women are nearly twice as likely as men to say they don’t know what the financial assets of their households are, and more likely than men (41 per cent versus 32 per cent) to be dissatisfied with how much they are saving for retirement.

Women also have lower expectations for their savings in retirement. On average, they expect to save less than men for retirement and they expect a greater proportion of retirement income to come from the sale of their home (50 per cent versus 40 per cent for men).

While the nationwide wage gap between men and women is beyond the control of individual plan members and sponsors, the gap relating to financial knowledge and retirement income expectations is not. For this reason, targeted education about the need to save and the benefits of increasing contributions may be a good starting point if a gap exists in your group plan.

Gender-check your plan
Times have changed significantly and women need to be the authors of their own financial security in retirement.

In 1976, just 8.5 per cent of opposite sex couples had a female spouse with the higher income. By 2010, that number had risen to more than 31 per cent, according to Statistics Canada. Women are also more likely to lead lone-parent families, with eight in 10 of such families female-led, accounting for nearly 13 per cent of all families in Canada.

Even in situations where a spouse might reasonably rely on his partner for retirement income, financial security is no sure thing. The Canadian government estimates almost 41 per cent of marriages will end in divorce before a couple’s 30th wedding anniversary, with all of the splitting of assets and additional costs that that entails, according to Employment and Social Development Canada.

The need for plan members of both sexes to save for their retirement is a real one. Employers should be mindful of any gender-related knowledge or contribution gaps that may exist in their retirement programs. If a gap does exist, the group plan provider can help assess the need for education or outreach to improve financial literacy and increase ongoing contribution rates.

Tom Reid is senior vice-president of group retirement services at Sun Life Financial. For more information about the Designed for Savings report, or to learn more about Sun Life’s Group Retirement Services, visit www.sunlife.ca.

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