Gender Difference in British Young Adults’ Retirement Saving Decision-Making Process: A Multi-Group Analysis Using Structural Equation Modelling (SEM)

Abstract

Several changes have been made to the state and workplace pension schemes in recent decades in Britain. One of the implications of these changes is that individuals now carry greater risks in accumulating and generating retirement income. Many studies have discussed the role of attitudinal and behavioral tendencies in the retirement saving decision-making process. However, the way these tendencies manifest themselves is assumed to be identical for men and women, as most studies examined the partial gender effect. These differences are particularly meaningful for those in early stages of adulthood, as their experience of key life events is shaped by socially constructed gender norms. While an increasing gender disparity in pension wealth over the life course is widely recognized in Britain, not many studies have provided empirical evidence on potential gender differences in young adults’ additional retirement saving. This study examines whether men and women differ in their retirement saving decision-making process, and if so to what extent. To do so, it uses an adapted version of Hershey and colleagues’ model of financial planning with the fourth wave of the Wealth and Assets Survey (WAS). Findings show that financial resilience, which represents individuals’ everyday financial behavior, is the most influential predictor for identifying retirement savers for both males and females. However, the manner in which their current socio-economic environment – income, homeownership, marital status, offspring – is interlinked with financial resilience varies considerably by gender. The partial effect of education on myopia also differs by gender. These findings suggest that there are indeed gender differences in the retirement saving decision-making process and that failing to consider such difference in policies may widen the gender gap in retirement saving.

Keywords: Gender difference, retirement saving, financial resilience, younger adults, structural equation modelling (SEM), multi-group analysis