More than a third of women face poverty in retirement, in part due to taking career breaks, according to new research from Scottish Widows.
The pension provider reported that, by age 55, one in four women will have been out of work for more than five years, which could result in a £70,000 hit at retirement.
Scottish Widows’ latest Women and Retirement report, published this week, stated that women were 12 times more likely to take a break in their careers in order to raise children, leading to a loss of income and gaps in pension contributions.
Women taking a five-year career break at 35 years old would reach the age of 67 with a pension worth £512,000. This is £69,380 less than for women who do not take a break in their career, Scottish Widows reported, with the gap driven by both missed contributions and lost investment growth.
Susan Hope, retirement expert at Scottish Widows, said millions of women in the UK were living with the gender pension gap without realising.
“To achieve true equality in retirement, we need to make sure career breaks don’t break women’s future financial security,” Hope said.
“We need to improve awareness and take-up of shared parental leave policies. This policy is critical, yet four in five women who had children in the last 10 years didn’t take advantage of it.”
She also advocated third-party contributions, which allow a spouse to save into a woman’s pension during her career break to help plug gaps.
“Employers also continue to play an important role in pension contributions during maternity leave,” Hope added. “Fortunately for women, employer contributions in a workplace scheme are often calculated based on their pre-leave salary.”
Scottish Widows found that around 40% of women made no financial preparations for taking time out of work, while 56% never considered the long-term impact on their retirement income.
The findings also showed that 42% of women felt their career break reduced their ability to save, compared with 37% of men.
Dame Denise Lewis, former Team GB track and field athlete, who is working with Scottish Widows on the launch of the report, said: “Throughout my sporting and punditry career, there have absolutely been times when I’ve stepped away from work, whether that was due to injury or raising my family.
“Those experiences taught me first-hand how important it is to have a financial plan that gives you security when your income is more up and down – something so many women can relate to.
“And crucially, it’s not only a challenge at the time, it also has a real impact on our futures. The more we can encourage women to start those vital kitchen table conversations about what their future looks like and how they’ll afford it, the better.”
