Young women need to save £185k more than men for an equal retirement income, a study has shown.
For women to have an equal retirement income to men, they will need £100k to bridge the savings gap, another £50k to cover longer life expectancy and £35k to pay for associated care needs.
This double whammy means saving £210 more a month from age 25 until the day they retire, a report shows.
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.
The 2021 report from Scottish Widows, which has been running annually since 2006, reveals that women currently in their 20s will have only saved around £250,000 by the time they retire. Men, on the other hand, will have closer to £350,000 on average.
Added to this, a 25-year-old man today will live to 86-years-old based on current estimates, while a woman can expect to reach the age of 89. With women living three years longer than men, 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.
Rather than being a worst-case scenario, there is a large range within life expectancies that mean women may need even more savings. One in four women who are 60 today will live to be 94, and one in 10 will live to 98. That is seven to 11 additional years beyond the average life expectancy.
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 per 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-20s until the day they retire.
Jackie Leiper, Managing Director of Workplace Savings, Scottish Widows, said: “It’s well known that the gender pay gap has a damaging impact on women’s retirement prospects. But women face a double whammy: even if we close the pension saving gender gap, pension equality would still not be achieved, because women need to fund a longer retirement and spend more on associated care costs.”
“There are ways to help level the playing field – from enhancing maternity pensions to offering better parental leave and financial support for childcare – so that women are no longer financially penalised for raising a family. Of course, we must also tackle the larger structural issues in our society, like the gender pay gap.”
This year’s Women & Retirement Report also revealed that the same proportion of men and women are now saving enough for a comfortable retirement (61 per cent) 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.
Jackie added: “After 17 years of reporting on gender differences in our Adequate Savings Index, it’s 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. Pension 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.”
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