The gender pay gap cuts significantly into retirement cushions

Have you saved enough for old age? Every third Austrian woman never asks herself this question according to an IMAS study. “It is astonishing that so many women never think about providing for their retirement. This is especially important for women”, emphasizes Birte Quitt, head of sales at Erste Bank. The piggy bank luckily gets filled anyway: Austrian women are on average putting aside 185 euro per month. Men can boast of significantly larger savings, as they are saving 238 euro per month. On an annualized basis, this amounts to a difference of 636 euro in the amount saved. In the longer term, for instance over a period of 30 years, the difference amounts to 19,080 euro. In addition, both men and women are diverting 40% of their savings to other family members. This means that women are ultimately left with only 111 euro per month for their own retirement, while men at least are left with 143 euro. Upon reaching old age at the latest, these deficiencies become noticeable and can tear a large hole in one's wallet.

Part time trap and retirement provision shortfall – the gender pay gap plays a role

Savings amounts are suffering due to differences in incomes: Austrian Women earn approximately 40% less than their male colleagues. This is primarily attributable to part-time employment, as about every second employed women is working part-time. Every third Austrian woman is consciously aware of the difference in incomes at her place of employment. “The gender pay gap cuts significantly into retirement cushions”, says Quitt. 94% of Austrians are convinced that part-time employment results in disadvantages in terms of retirement provision and pension payments. “Part-time employees also have worse career opportunities, which 9 of 10 women are convinced of. All of this has a negative impact on salaries”, Quitt says. In addition, maternity leave also affects one's financial cushion negatively as well: Two thirds of Austrian women believe that maternity leave results in large financial penalties with respect to retirement provision.

Money is managed jointly: Only 2 out of 10 women earn as much as their husband

3 out of 4 Austrian women live in a partnership. The familiar topic of money is thereby often a sensitive issue. In 6 out of 10 partnerships men are the main breadwinners, in only 2 out of ten women are. If the partner has a higher income, 78% state that they are financially dependent on their partner and

wouldn't be able to maintain their standard of living without him or her. In many partnerships finances are managed jointly: 71% of Austrian men and women make financial decisions together with their partner. Every second couple has strictly segregated accounts, 26% in addition have a joint account. A similar number have only a joint account. “What is most important is that one is aware of one's joint finances and situation”, says Quitt. In most cases both partners are keeping an overview over income and making ends meet. However, while 28% of women say that they are the only ones keeping an eye on expenses and money, only 19% of men say so. 15% of men even leave this job completely to their female partners.

Every Second Man is Filling His Partner's Piggy Bank

9 of 10 Austrian men and women are saving for themselves. This is closely followed by saving for children: 58% of women and 53% of men are putting money aside for their offspring. Moreover, every second man is filling his partner's piggy bank, while one quarter of women are doing this for their husbands. “Especially in those times when the man is the only breadwinner, it is necessary that he save for his female partner as well. One should talk about this openly”, Quitt advises. The top incentive for saving for Austrian women is building a reserve for old age (32%), in second place are savings for a rainy day, followed by savings for housing (22%).

Mr. and Mrs. Austria are safety-conscious investors

Traditionally both genders are concerned about safety in their investments: 8 out of 10 men and women have a savings book, 70% have a building savings account. Men more often take out life insurance policies for other family members (27%) than women (19%). One third of men and one quarter of women own risky investments such as stocks, bonds, or investment funds. For 8 out of 10 Austrian women the most popular contact persons with regard to financial questions are bank advisors, every second woman discusses things with her partner. Bank advisors are also in the top spot for Austrian men (7 out of 10), 53% consult their partner. 27% of men and 22% of women look for information on the internet.

Three golden rules for a well-padded retirement cushion

With respect to retirement provision, every second Austrian woman would like to see banking products designed especially for women. Quitt: “A special savings book for women is no solution for the problem. Ultimately, the necessary products already exist. The key to retirement provision for women are the different special stages of life.” Maternity leave, childcare, part-time employment, and the associated lower income must be taken into account in one's retirement planning. Moreover, women live on average five years longer than men. This can become important in old age, especially in the case of women who are dependent on the income of their husbands. “As a bank we cannot do anything about the part-time employment trap, or about balancing differences in incomes. However, we can help with building up retirement and financial security as effectively as possible”, Quitt explains.

The recommendations:

the earlier one begins, the bigger the return. Quitt advises: “Especially women should begin with providing for retirement as early as possible. Ideally already with their first salary.” Even if a woman can only put aside small amounts, compound interest helps with growing savings more effectively. If one for instance begins to put aside 50 euro per month at age 20 at an average interest rate of 2%, one will already have saved 6,473 euro by the time one reaches the age of 30.

Saving should be based on three stages: short, medium and long term. “Think about today, tomorrow and also the day after tomorrow”, Quitt admonishes. Around three monthly salaries should be available for short term expenses. Investments goals should be planned over a medium-term horizon, but retirement provision mustn't be forgotten, so that nothing stands in the way of self-reliance in old age.

Financial independence is not in contradiction with a good partnership. It has nothing to do with a lack of trust”, says Quitt. Partners should be independent from each other in their daily financial life up to and including retirement provision. It is important to lay the cards openly on the table, to talk frankly about income and expenses, as well as whether someone needs additional financial protection. If there is a sole breadwinner, he or she should provide for the partner's retirement as well. It is important that the products are in both their names, and that not only joint access, but joint proprietorship is assigned to accounts. “As a matter of principle, finances in a partnership require talking about things and making provisions”, says Quitt.

About the survey: On occasion of International Women's Day, market research institute IMAS has conducted a telephonic survey on behalf of Erste Bank on the topic of women and finances. In the time period from 26. to 30. January 2015 505 persons were asked whether they are aware of the gender pay gap in their job, which financial penalties part-time work and maternity leave are causing, how much they are able to save for themselves and for family members, which products they make use of for themselves and for family members, who the main breadwinner is, whether husband or wife are taking financial decisions and whom they are asking for advice in financial questions. The results are representative for the Austrian population from age 18.