Women are retiring with pension pots significantly smaller than their male counterparts due to obstacles to saving at every stage of their lives, a new report suggests.
The divide starts early in life, with 37% of women aged 18-24 feeling confident managing their money, in comparison to 48% of men, the report from the Chartered Insurance Institute (CII) reveals.
Furthermore, at the start of their careers the research found that just 8% of women saw contributing to a pension as their highest priority.
Childcare and domestic work means nearly two thirds of women will only return to work part-time, and will earn 30% less that full-time working women.
This contributes to a national gender pay gap of 9% as women returning to work fail to keep up with men. The CII found that the gap is a major contributor to women’s lack of pension saving.
Currently women aged 65 have an average pension pot of £35,000, just one fifth the size of the average man’s pension pot at the same age.
Women in their 20s earning an average wage can expect to save a pension pot of £40,000 by age 65. But care costs are likely to be four times higher at £132,000.
Sian Fisher, chief executive of the CII, comments: “Women’s lives and freedoms have changed for the better, yet society’s expectations of women have not. The serious financial disadvantage women face in old age cannot be attributed to any one factor but is a combination of societal, health and financial factors stacked against them.
“Women are living longer, however, care costs them more at the end of their lives. Women are succeeding in the workplace and the gender pay gap is hopefully closing but caring for family, even for just a few short years, significantly impacts a woman at retirement. It is the culmination of all these factors that is potentially driving women towards to poverty in old age.”
How to close the gender pensions gap
Maike Currie, Investment Director for Fidelity International says: “A knock-on impact of women being paid less than men, means they’re saving less into their pensions. In addition, women are more likely to take time off work to care for loved ones or work part time.
“Being aware of the pivotal moments in our life, personally and financially, as women is extremely important. Make sure your savings are working hard enough so that you not only will be able to live in comfort during retirement but can meet all the milestones in your life with ease. But if you choose to do one thing to help your finances, save into a pension.
“Our research found that if a woman contributed an extra 1% of her salary to her pension than she could close the gender pension gap by retirement.”
Rose St Louis, spokesperson for Zurich UK, adds: “Women already face barriers to securing a comfortable retirement income, and it’s no longer just down to the pay gap or career breaks. Pension freedom has given people far greater choice in how they access and spend their retirement savings, but there are clearly unintended consequences emerging.
“For women, a smaller pot at retirement combined with a longer life expectancy means investing wisely is crucial. If consumers are less engaged with their pension then they are at risk of making poorer decisions that could result in a lower income, or even outliving their savings. For both men and women, the need for financial advice and guidance in retirement is greater than ever.”