One of the benefits of lockdown for me has been the ability to go for regular walk ‘n’ talks with my mum. We are close, in many ways alike, but financially we are worlds apart.  

We are both parents, divorced and working part-time. Where we differ is that my mum took a career break to have my brother then me. When she returned to work she never saved towards a pension until she was in her early 50s and when she got divorced she took a cash settlement and gave up any entitlement to my dad’s accrued pension. 

Where we are similar is that we are resilient. We are not scared to invest and make our money work for us and we know we can manage our money as we both successfully manage our own household budgets. Where we differ again, is that for my mum, it is too late for her to make a tangible difference to her retirement savings – she should have been encouraged to save sooner and provided with better access to advice and support when she was making difficult financial choices.

This is just one example, but my mum is not alone in inadvertently realising that she will be retiring with less than her male equivalents. If you read the research report prepared by the Pensions Policy Institute on “Understanding the Gender Pensions Gap” you will see that, in their early 60s, the median private pension wealth of women is one third of men’s private wealth.

What’s the problem?

There are a number of different factors that contribute to the different wealth positions, from working patterns, salary differences and participation. However, one of the biggest challenges is around communication.

The Wisdom Council at the end of 2019 released the findings of their “Yes She Can” project, noting a range of challenges. What stuck out was that the pensions industry is not only speaking the wrong language to women, but they are also often having the completely wrong conversation which results in communications falling on deaf ears and having no impact. They suggested that to address the gender pensions gap and encourage long term savings we have to get on women’s radars by making investing and long-term savings part of everyday conversations. Most women don’t realise they are investors through their workplace pension. 

For pensions engagement to be successful it is important that we understand who we are engaging with and, therefore, any potential barriers to allow us to be more inclusive. There is evidence of differences in savings behaviours, attitude to risk and financial priorities across different areas of diversity. Gender diversity is one of the most visible areas of diversity in the pensions industry, but it is far from the only area.

Diversity is broader than just male or female

Diversity covers so many things, such as: gender, gender identity, ethnicity, religion, abilities, education, socio-economic background, language, age, family values etc but they are all equally important in terms of how an individual sees themselves and therefore what engages them or has an influence on their decision making.  Inclusion means finding a way to effectively involve individuals of all backgrounds.

Why look at this now?

The Pensions Regulator and companies are looking at how boards can become more diverse and inclusive.  There is a real opportunity for Trustees and Governance Committees to work jointly with their sponsor on developing a diversity and inclusion policy and inform their strategy. 

We are also going through an unprecedented time in our economy, in our households and families, and pensions will not be untouched by Coronavirus. We know that after the 2008 recession there was a material reduction in pension savings, and according to a Scottish Widows research, as a result of Coronavirus we could see 3 million individuals either reducing or completely stopping their pension contributions. Now more than ever, the ability to communicate effectively could make a tangible difference in the financial outcomes for all pension scheme members. 

So, what can you do?

This is a challenge that is perhaps bigger than just you or your sponsor, but that doesn’t mean that we shouldn’t all start taking small steps now to learn more. A good starting point is diversity on your board and recognition that you need a plan, noting that it will not be a “one size fits all” plan. Look at your own scheme data, are there any differences in contribution levels or investment choices?  Review your approach to communications through a diversity lens. Does what you deliver have appropriate images, does it use inclusive language? Your pension provider has a wealth of data and learning, so get them to share with you their findings and how they are hoping to drive forward change. 

Many good sponsors are treating diversity and inclusion as a business priority and are developing clear strategies, setting targets and being held accountable for their decisions - so ask your sponsor where pensions feature in their strategy. 

And finally, this really all starts with a good discussion to raise awareness of the challenge with a view to setting a diversity and inclusion policy. I am one voice, with one experience, but there are many others out there, likely just as happy as I to share my learnings with you.

Look out for next month's article where we use the Guided Outcomes databank to further illustrate the impact diversity and inclusion has on member outcomes.