Statistics comparing the higher education and wage levels of men and women are well known. In France, women have more qualifications than men, according to 2015 gender equality data from the OECD. By contrast, INSEE figures from 2013 show that, despite a small improvement over the past 10 years or so, women remain less well paid than men in France, on average by 19%.
In terms of preparing for retirement, OpinionWay surveyed 1 014 pensioners and 1 016 contributors over the age of 50 in the private sector in 2016 on behalf of social protection group Malakoff Médéric. This showed that a majority of French people today are failing to prepare for retirement. A few figures to illustrate this:
-Although 75% expect a change in their lifestyle when they retire, 56% of contributors over the age of 50 recognise they have a ‘vague idea’ of the value of their future pension.
-Less than five years before the end of their working life, only one worker out of three said they had started to prepare a budget for their retirement.
Do men and women behave differently when preparing for retirement?
In June/July 2015, CICERO Group (an international corporate and finance communication agency) surveyed 2 000 representative French adults on behalf of BNP Paribas Investment Partners (BNPP IP) concerning their priorities in terms of savings and preferences for the various investment alternatives as they prepare for retirement.
The BNPP IP study focused on the attitudes of French men and women towards pension savings. The main results were as follows.
Less awareness of the challenges associated with retirement
In France, people remain fairly confident that the existing pay-as-you go scheme is sufficient. Indeed, the study shows that more than 50% of women (and even more men) believe that a state pension will provide them enough income to enjoy a comfortable retirement.
Only 22% of women (compared with 32% of men) know how much they need to prepare for their retirement.
Men receive more information and training about pension savings via company savings plans – to which they have greater access due to their over-representation relative to women in the large companies that have such schemes in place. Meanwhile, more women work in small companies, which often have no savings plans. And marginally more women also work in public sector companies, which have no savings plans at all.
In the division of tasks between couples, the subject of retirement is often delegated to the husband:
-30% of men stated they had sole financial responsibility for preparing for retirement compared with 17% of women
-62% of men are more inclined to make financial decisions compared with 52% of women.
The risk of a fall in income at retirement is far higher for women
Women face a higher risk of a decline in the replacement rate than men given that they are less well prepared. There are several reasons.
Women have a lower savings capacity than men. This is intuitive given the wage gaps noted by INSEE and also found in the BNPP IP study. Having a family has a greater financial impact on women in terms of salary (choosing to work part-time or stopping altogether). As said, women have less access to company savings plans since they often work in small companies and in the public sector. Thus, just 11% of French women save for retirement via company savings plans compared with 17% of men. In all, women save half the amount that men do.
Fewer women save for retirement. Among the people that stated they had savings (75% of the sample) and were not yet retired, 54% of men said they had started to save for retirement compared with 44% of women.
Women save less regularly: only 36% save on a regular basis compared with 42% of men.
A portion of women start saving too late. Indeed, the attitude towards pension savings is very different between men and women in the 25-44 year age group (14% difference). Savings decisions are delayed by women: 19% of women start saving after the age of 45 including 9% after 55.
The choices of investments are not always best suited to preparing for retirement. Thus, short-term products (bank savings accounts) are the top retirement investment solution for men (48%) and women (47%). While 39% of women (33% of men) prepare for retirement in particular by acquiring their home, which is a rational choice, not so many go for solutions that not only carry higher risk but also offer far better potential performance over the long term.
Women are more adverse to financial risk than men: 73% of women never take risks with their money compared with 55% of men; 14% of women have an equity savings plan compared with 26% of men; 7% of women have a pension savings plan compared with 13% of men. For 36% of women, having a family is not compatible with taking risks in investments.
A far deeper decline in the replacement rate for women: a risk, but not a fatality
The issue of complementary pension savings is a subject that concerns all French people. On the one hand, a large majority still believes that the state will continue to maintain the same replacement rate. Many do not or cannot invest some of their savings to offset the future and unavoidable decline in the replacement rate. The economic crisis and high unemployment have tended to increase precautionary savings significantly to the detriment of other asset classes. In this not very reassuring setting, women are generally less well prepared for all of the above-mentioned reasons, whereas they hold the record in terms of the length of their retirement at 27.4 years on average in OECD countries (Pensions Panorama, December 2015, OECD)
Graph 1: Retirement is long in France (average number of years spent in retirement for women in France, Spain, South Africa, Sweden, Italy, Germany, UK, US, China)
There is a challenge for women to take control of (rather than delegate) pension issues. A few suggestions that could make sense:
-Given their lower savings capacity, women should start to save earlier, even if the amounts are low to begin with, and take greater risk, especially at the beginning of the cycle.
-Save more regularly: programmed saving helps to set up a systematic and regular savings scheme that doesn’t need thinking about and helps smooth out the entry into risk assets.
-When women start having children, they should continue to think of themselves and their future. Starting a family tends to reduce women’s revenues and shorten their investment horizon since they focus their energy on the education and needs of their children.
Clearly, more work on information and awareness needs to be undertaken. The survey reveals that 33% of women always seek the advice of a financial advisor before investing. It would appear that bank advisors could play a role here. In addition, the creation of a client retirement path dedicated to women is an idea worth looking into.