On the go: Women will need to save an average of £185,000 more during their working life to enjoy the same retirement income as men, according to new research by Scottish Widows.
The latest Scottish Widows ‘Women and retirement report’ found that women currently in their twenties will have only saved around £250,000 by the time they retire, whereas men will have closer to £350,000 on average.
Scottish Widows estimates that the average woman will need £400,000 in her pension pot to achieve the same level of retirement income as a man with £350,000.
The gender pensions gap is made up of a savings shortfall plus the need to fund a longer retirement, because women on average live longer than men, resulting in higher care costs.
The issue is amplified by differing life expectancies, the report stated. A 25-year-old man will live to 86 based on current estimates, while a woman can expect to reach the age of 89.
With longer lives comes a greater need for care in older age. Estimates suggest women spend on average 460 days in care homes, while men spend just 100. With the average cost of care at £679 a week, this means women can expect to spend £35,000 more than men.
Overall, this means women need to save an extra £185,000 to achieve the same retirement lifestyle as a man. This would require saving an extra £2,500 per year, or £210 every month, from their mid-twenties until the day they retire.
Jackie Leiper, managing director of workplace savings at Scottish Widows, said: “It’s well known that the gender pay gap has a damaging impact on women’s retirement prospects.
“But even if we close the savings gap, pension equality would still not be achieved. Women need to fund a longer retirement and shell out more on care costs,” she said.
The report outlined a series of recommendations designed to help eradicate gender pensions inequality, including reforming auto-enrolment to increase default contributions and the mandatory inclusion of pensions in divorce settlements. It also recommends raising awareness of joint annuities and lobbying for regulatory intervention on this issue.
Leiper added that enhancing maternity pensions to offer “better parental leave and financial support for childcare” would help ensure that women are “no longer financially penalised for raising a family”.
This year’s report also revealed that the same proportion of men and women are now saving enough for a comfortable retirement for the first time on record.
In 2007, the Adequate Savings Index recorded its widest gap ever, with 54 per cent of men saving adequately versus 41 per cent of women. In 2021, that gap has closed completely, with three out of five men and women (61 per cent) putting away the recommended minimum of 12 per cent.
Leiper said that it is “encouraging” to see the gap finally closed. “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.
“Pensions 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,” she added.
