Pension Gender Gap: Young women need to save £185k more to reach the same retirement pot as men

Recent research* from pension specialist Scottish Widows shows that women will need to save an additional £185k to enjoy the same retirement savings as men.

This staggering gap is made up of £100k to bridge the savings shortfall, £50k for a longer retirement because women on average live longer than men plus an additional £35k to pay for associated care needs.

Put simply, this means women need to save £210 more every month (than their male counterparts) from age 25 until retirement.

The report reveals that women currently in their 20s will only have approximately £250,000 saved by the time they retire.  In contrast, men will have closer to £350,000 on average. In addition to this, a 25-year-old man today has a life expectancy of 86 (based on current estimates), while a woman of the same age (25) can expect to live to age 89.  With women living three years longer than men, a woman will need £400,000 in her retirement pot to achieve the same level of income as a man with £350,000.

Research shows that women may need even more savings, due to longer life expectancy. One in four women who are 60 now will live to age 94 and one in 10 will live to age 98! That’s a range of seven to 11 additional years beyond the average life expectancy.

“These statistics are worrying, but they do not surprise me” says Liza Pontone, chartered financial planner & ambassador for the Chartered Insurance Institute’s Insuring Women’s Futures programme**

“my advice to all women is that pension accumulation should be a high priority.  If you have access to a workplace pension scheme join it, if you do not, then speak to a financial planner and start your own personal pension arrangement.  If you can, also look to increase your pension contributions beyond workplace pension minimum limits; the more you save the larger your retirement pot.  Also, if you take on the ‘carer role’, always consider flexible working rather than reducing your hours, this will maintain the continuation of your full-time salary along with higher pension contributions”

Greater life expectancy unfortunately comes with a greater need (and greater expense) for care in older age. Research suggests that women spend on average 460 days in care homes, while men spend a lot less, just 100 days. The average cost of care homes is £679 per person per week meaning the cost for a woman is £35,000 more than for a man.

“Sadly, the longevity trap is another peril and pitfall facing women later in life” continues Liza

“women need to consider how ill-health may affect their retirement provision.  Planning early and making those pension contributions will make a huge difference and ultimately provide the financial independence and security in retirement that all women deserve”

We always recommend that you seek financial advice before making any financial decisions

Pension is a long-term investment, the fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available

* Scottish Widows Women & Retirement Report 2021; the research included general questions on pensions and retirement planning and was carried out online by YouGov Plc across a total of 5,059 adults aged 18+

**Insuring Women’s Futures aims to evolve the insurance and personal finance profession‘s approach to women and risk, working with all those with a shared interest in improving financial security for women and society as a whole

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