Young women need to save an extra £185k for same retirement income as men

Women in their 20s will need to save an average of £185,000 more than men their age over their working life to have the same income in retirement, Scottish Widows has revealed.

Its Women & Retirement Report found that the savings gap, longer life expectancy and associated care needs would result in a retirement shortfall of £185,000 in comparison to men.

Women in their 20s would have saved an average of £250,000 by the time they retire, according to the report, while men would have saved closer to £350,000 on average.

Furthermore, the current life expectancy estimates that a man in his 20s will live to 86 and a woman in her 20s will live to 89 mean the average woman will need £400,000 in their pension pot to achieve the same level of retirement income as a man with £350,000.

Scottish Widows also noted that there is a large range of life expectancies, and this will mean some women may need even more savings.

Longer life expectancies would also likely lead to the greater need for care in older age, with women estimated to need an extra £35,000 for later life care.

Overall, this results in women in their 20s needing to save an extra £185,000 to achieve the same retirement lifestyle as a man.

“It’s well known that the gender pay gap has a damaging impact on women’s retirement prospects,” said Scottish Widows managing director of workplace savings, Jackie Leiper.

“But women face a double whammy: even if we close the pension saving gender gap, pension equality would still not be achieved, because women need to fund a longer retirement and spend more on associated care costs.

“There are ways to help level the playing field – from enhancing maternity pensions to offering better parental leave and financial support for childcare – so that women are no longer financially penalised for raising a family. Of course, we must also tackle the larger structural issues in our society, like the gender pay gap.”

To help address the gender pensions gap, Scottish Widows has called for reform to auto-enrolment to increase default contributions and the mandatory inclusion of pensions in divorce settlements.

The report also revealed that the same proportion of men and women (61 per cent) are now saving enough for a comfortable retirement for the first time on record.

“After 17 years of reporting on gender differences in our Adequate Savings Index, it’s encouraging to see the gap finally closed,” Leiper added.

“However, this must come with a health warning, as women remain disadvantaged by persistent inequalities in our society.

“We need to build on this positive step forward and now focus on closing the remaining inequities that impact savings. Pension inequality is not just an issue for women to resolve, structural unfairness affects us all and needs the collective efforts of us all to resolve this persistent imbalance.”

    Share Story:

Recent Stories

Are current roads into retirement delivering member value?
Laura Blows explores HSBC Master Trust’s recent report, Converting pension pots into incomes, with HSBC Retirement Services CEO, Alison Hatcher.

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

Pension portfolios – the role of asset-backed securities
Laura Blows is joined by Royal London Asset Management (RLAM) head of sterling credit research, Martin Foden, and its Senior Fund Manager, Shalin Shah to discuss the role of asset-backed securities (ABS) within pension fund portfolios
Incorporating ESG into fixed income
Laura Blows is joined by TCW head of fixed income ESG, Jamie Franco, to discuss incorporating environmental, social and governance (ESG) strategies into fixed income portfolios