Women must heed the pension timebomb
YOUNG female savers are likely to have £100,000 less in retirement income than their male counterparts, according to data from Scottish Widows.
Lower earnings, part-time work and taking time out of paid employment to care for family are setting women back by almost four decades and to reach retirement parity, a woman in her 20s today will have to work on average 37 years longer than a man the same age to accumulate the same income.
Young women were already on the wrong side of the gender pensions gap, which has only widened as a result of the pandemic. More than a third under the age of 25 work in hardest-hit sectors such as hospitality and retail, and almost half have been furloughed.
Jackie Leiper, managing director of pensions, stockbroking and distribution at Scottish Widows, said: “Women were already facing systemic challenges when saving for retirement.
“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.”
A typical young woman might be putting away £2200 a year, compared with £3300 for men. That is a difference of more than £1100 in savings every year. Over a lifetime, this difference widens as wage increases lead to significant inequalities in retirement income.
If the average woman was to up her contribution at the start of her career and save an extra four 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 five per cent would increase this to £94,000, which would close the gap almost completely.
This has to be a good thing, said Jackie Leiper: “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.”