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Mind the pension gender gap

Women are being urged to think about their long term savings

Imagine reaching retirement age and discovering that, despite years of saving, you don’t have enough money to get by. Worse still, suppose you’re unable to pay for the right kind of care in your old age.

If you and your partner separate or your spouse dies unexpectedly – will you have sufficient funds to see you through retirement? Now, all of these might sound like worst case scenarios but, unfortunately, for women right across the UK one or more of them could become a reality.

Earning trends
Women are still behind men when it comes to retirement savings. The Women and Retirement report[1] has found that if current work and earning trends continue, young women today will need to save an average of £185,000 more during their working life to enjoy the same retirement income as men.

The colossal gender pension gap is made up of a savings shortfall, plus the need to fund a longer retirement because women on average live longer than men. This also leads to higher care costs. Many women will naturally take time off to start a family – resulting in gaps in their work history. And even if women remain in the workforce, some still tend to earn less than men, on average.

Vulnerable situation
21% of women surveyed said they plan to rely at least partly on their partner’s income in retirement. However, this can leave women in a particularly vulnerable situation should they separate from their partner.

Right now, it’s rare for divorce settlements to account for pension assets, which means that women could end up in particularly unstable financial situations following divorce.

Funding retirement
Also, women tend to live longer than men – two to three years, on average. Indeed, this continued rise in longevity means that a 25-year-old man today can expect to live to 86, while a woman can live to 89.

And while rising longevity is of course a good thing, it does raise specific challenges – especially when it comes to funding retirement and old age.

Living longer
Together with living longer women are also more likely to need care when they’re older. In fact, of the 6 million people in the UK over the age of 60 currently living with a disability, 3.5 million of them are women.

And those women who do need care spend on average a year longer in care homes than men. Right now, the average cost of care is £679 per week, which means women would need an extra £35,000 during retirement for residential care costs.

Moreover, as women can expect to live two to three years longer than men, they would also need around £50,000 for their retirement – bringing the total amount needed to match a man’s retirement income to £185,000. 3

Source data:
[1] Scottish Widows 2021 Women and Retirement Report – research carried out online by YouGov Plc across a total of 5,059 adults aged 18+. Data weighted to be representative of the GB population. Fieldwork was carried out between 23rd March and 3rd April 2021 through an online survey. 5,059 interviews were carried out. The sampling criteria were based on four key metrics: age, gender, region and social grade.

A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028 UNLESS PLAN HAS A PROTECTED PENSION AGE). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.

THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.

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