Women’s pension pots are one fifth of men’s

Written by Lori Campbell on 24th Oct 2018

Women retiring at age 65 have an average pension pot of £35,800 – just one fifth of men the same age, according to a new report.

The 20-page study published by the Chartered Insurance Institute’s ‘Insuring Women’s Futures’ task force shows that women today are living longer, are better educated and have greater access to career opportunities.

However, with earnings forming the basis for pensions savings, the gender pay gap is causing them to face a glaring pensions deficit when compared to men.

Jane Portas, Insuring Women’s Futures committee lead on Women’s Risks in Life, says women in Britain today contribute to the economy and society more than ever before.

She said: “A young British woman can expect to work until she is 70, do the lion’s share of family caring, and save hard for her retirement. And yet with lower lifelong earnings, she risks facing financial insecurity in later life, and the prospect of not being able to pay for her own care.”

With men earning 80 per cent more than women over a lifetime, women are increasingly dependent on husbands or partners when it comes to their retirement fund. With less people getting, and staying, married this puts women’s financial futures at risk.

She said: “Today, on average, married men’s pensions pots are five times married women’s, with pensions dependencies between the sexes expected for many years to come. Changes in our work-life patterns, the rise in cohabitation and increasingly fragmented family structures means that modernising pensions is a must.”

The report found that nearly three quarters of divorcing couples do not discuss pensions. On top of this a quarter of 30-34 year olds now cohabit and one third of babies are born to cohabiting couples who lack legal rights upon separation. One third do not realise this, and nearly 4/5ths of millennial women and their partners have not discussed their pensions in detail. The median pension wealth of separated women in the UK is £0.

The motherhood penalty is also a big factor in the pension deficit for women. The report found that almost two thirds of mothers return to work part-time. They earn 30 per cent less per hour than full-time women – who are themselves subject to a national full-time gender pay gap of nine per cent.

A woman’s average pension pot is just a fraction of her financial needs in retirement and doesn’t account for life care costs. These come to around £132,000 for a 65-year-old woman entering a care home in the UK.

Women’s greater life expectancy means that her pension pot typically needs to last longer than a man’s and her care costs are greater. Figures for the Office of National Statistics in September showed life expectancy at birth stood at 79.2 for a man and 82.9 for a woman in 2017.

A lack of knowledge continues to be a barrier to women saving into a pension. Only eight per cent view a pension as their highest priority when starting work, and over half of women in their late 20s say they don’t understand enough to make decisions about retirement savings.

The introduction of ‘pensions freedoms’ in 2015 has brought additional risks for women, with factors such as investment experience and access to advice contributing to a gender drawdown gap – older women are facing a 37 per cent retirement income shortfall compared to men.

The report highlights 12 financial ‘Perils and Pitfalls’ that impact women’s financial resilience throughout life and culminate in a pension deficit. These include young women’s financial capability, the motherhood penalty, part-time working, and a need for improvement in how the insurance and personal finance profession serves women.

The Insuring Women’s Futures market task force – made up of senior leaders from across the insurance and personal finance profession – will take steps to address some of the root causes of these issues.

Sian Fisher, CII’s chief executive and chairwoman of the Insuring Women’s Futures committee, said: “Women’s lives and freedoms have changed for the better, yet society’s expectations of women have not.

“By 2020, 12 million people will be above the state pension age and, of these, there will be a million more women than men. Insurance and financial planning have a central role in supporting people to manage their financial risks in life.

“The findings in this report show there is much to be done to improve women’s pensions and financial resilience generally.

“In conjunction with our Market Task Force Manifesto, Insuring Women’s Futures calls upon government policymakers, regulators, the legal, insurance and personal finance and wider financial services profession to unite with society to realise positive change to create a sustainable retirement for all.”

Last month Good With Money, in partnership with PensionBee and some of the UK’s top mum bloggers, launched a campaign to encourage mums who do not have a current pension of any kind, to think about their own futures too and start saving as much as they can. See what our mum bloggers had to say about their own pension savings here

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