Keeping warm and paying the rent... fears of women in old age

MORE than half of UK women are worried they will not be able to afford even the basic necessities in retirement, warns a report out today.

Keeping warm, having enough food and paying the rent or mortgage are all financial costs which 57 per cent of women think they will struggle with in old age.

The average pension pot of women aged 65 is £35,800 – just 20 per cent of men the same age.

Despite equal pay legislation and the spotlight shone on the gender pay gap recently, men’s lifetime average earnings are about 80 per cent greater.

With pensions savings based on earnings, these gender differences persist through to retirement and later life.

The report, called Insuring Women’s Futures, has been published by the Chartered Insurance Institute.

Sian Fisher, chief executive of the CII and chairwoman of the Insuring Women’s Futures committee, said: “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 to poverty in old age.

Researchers found 53 per cent of women workers do not know how much they are saving into a pension each month or have not even started saving.

Maike Currie, investment director for Fidelity International, said: “A knock-on impact of women being paid less than men means they are 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.

“But if women have to choose to do one thing to help their finances, saving into a pension is it. If a woman contributed an extra one per cent of her salary to her pension, she could close the gender pension gap by retirement.”

Shortfall

The introduction of pensions freedoms, which allow savers access to their whole pension pots, have also introduced additional risks for women.

They live longer and have not as much investment knowledge so are facing a 37 per cent retirement income shortfall compared with men.

Jane Portas, of the Insuring Women’s Futures Committee, said: “A young British woman can expect to work until she is 70, do the lion’s share of family caring and save hard for retirement.

“And yet with lower lifelong earnings, she risks facing financial insecurity in later life and the prospect of not being able to pay for her own care.”

Changing family patterns in the UK are also exposing women financially, the report said.

Married men’s pensions pots are five times that of married women’s, and yet nearly three-quarters of divorcing couples do not discuss pensions.

Samantha Seaton, CEO of Moneyhub, said: “The harsh reality is that the majority of women simply aren’t saving enough. Auto-enrolment means more people than ever are contributing to their pension, but few really understand the value of doing so.”

WHAT is to be done about the problem of women saving too little for retirement if indeed they are saving anything at all? Female working lives are more complicated than those of their male counterparts, with the need for maternity leave and perhaps part-time work when the children are young but what is really lacking here is education.

Many women were not aware what would happen to them after the changes in the state pension age and it is not impressed enough on either sex the necessity to start saving for old age as young as they can.

It is high time personal finance was taught in schools. People are not born with the relevant knowledge. As it is, far too many risk walking into poverty in old age.