The average woman in her twenties is projected to accrue £100k less in her pension pot than a man of the same age and would have to work an estimated 37 extra years to make up the shortfall, according to research from Scottish Widows.
Lower average earnings, part-time work and taking time out of paid employment to care for family is setting women back by almost four decades, data from the provider shows.
The provider calculates that a typical young woman would put away approximately £2,200 a year, compared to £3,300 for men. That is a difference of more than £1,100 in savings every year. Over a lifetime, this difference widens as wage increases lead to significant inequalities in retirement income.
If the average woman were to up her contribution at the start of her career to save an extra 4 per cent into her pension, her pot at 68 could be £329,139. This would reduce the gender pensions gap by almost £75,000. Upping contributions by 5 per cent would increase this to £94,000, which would close the gap almost completely.
Released on International Women’s Day, the figures highlight the extent of the gender pensions gap, which is being exacerbated by the economic fallout of the pandemic with 36 per cent of women under the age of 25 working in hardest hit sectors such as hospitality and retail, where almost half – 49 per cent – have been furloughed.
A lack of engagement amongst young female savers is also contributing to lower savings levels, says Scottish Widows. More than one in five – 21 per cent – of women under 25 admit that they have not started thinking about retirement, and just 46 per cent of women in their 20s are saving the recommended minimum of 12% of their income, compared to 56 per cent of men.
Scottish Widows managing director, pensions, stockbroking and distribution, Jackie Leiper says: “Women were already facing systemic challenges when saving for retirement. We know that young women have been some of the hardest hit by the short-term financial impact of the pandemic and this has only exacerbated the challenge of reaching pensions parity. At the same time, caring responsibilities and high childcare costs are keeping women out of the workforce, lowering their contributions and denting their pension pots.
“Whilst we can’t change societal norms overnight, progress is still possible to help young women achieve a comfortable retirement. By taking control of their contributions and increasing them as early as possible, young women stand a fighting chance of improving their long-term savings outlook.”
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