Pension inequality between men and women has been a key issue for some time now and Scottish Widows have provided research on this in light of International Women’s Day. According to their findings, young female savers are set to have £100,000 less in retirement income than their male counterparts.
Scottish Widows found that lower average earnings, part-time work and taking time out of paid employment to care for family is setting women back by almost four decades.
To reach “retirement parity”, a woman in her 20s today will have to work 37 years longer than a man the same age to accumulate the same income.
Scottish Widows explained: “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 (36 percent) under the age of 25 work in hardest hit sectors such as hospitality and retail, and almost half (49 percent) have been furloughed.
“Any reduction in hours or a career break will have an impact on pension outcomes. For those working part-time or on reduced hours, this can mean lower contributions or missing out on auto-enrolment.
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“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.”
Fortunately, it was highlighted that small changes could close these pension gaps.
Scottish Widows detailed a typical young woman may be putting away approximately £2,200 a year, compared to £3,300 for men.
This is a difference of more than £1,100 in savings every year and over a lifetime, this difference only widens as wage increases lead to significant inequalities in retirement income.
However, if the average woman were to up her contribution at the start of her career to save an extra four percent into her pension, her pot at 68 could be £329,139.
This would reduce the gender pensions gap by almost £75,000, while upping contributions by five percent would increase this to £94,000, which would close the gap almost completely.
In recognition of International Women’s Day, both ILC and Phoenix Group are calling for policymakers to support Gen x women to save more for retirement by altering flexible working rules and making carer’s leave more generous.
Sophia Dimitriadis, a Research Fellow at ILC and author of the report, commented on this: “Gen X women disproportionately struggle to save, with many finding it difficult to juggle care responsibilities with work, making them less able to afford to save as much as they need to.
“Many also feel too overwhelmed with the multiple priorities they are juggling to think about retirement.
“We urgently need to make it easier for people to combine caring responsibilities with work. Enhancing access to flexible work opportunities can play a key part.
“The COVID-19 pandemic has shown us that far more jobs can be done on a flexible basis than we previously thought. There is no better time to require all jobs to be flexible on a default basis.”
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