Women are 33% more likely than men to say they do not understand how their pension works – indicating a lack of financial confidence, according to by Legal & General Retail’s Lost Decade research.
This lack of confidence could be why women are less likely to have engaged with key financial products which will drive better outcomes in the future. For example, women are 38% less likely than men to have a stocks and shares ISA, and 32% less likely to have a private pension.
Check out our recent podcast discussing the Gender Pensions Gap with Caitlin Southall below:
Analysis by Legal & General Retail1 has found that this lack of engagement, along with other factors such as the gender pay gap, could see young women in the UK (aged 22 to 32) with the equivalent of just £12,873 per year by the time they reach retirement in the 2060s. By comparison, young men are on track to have almost a third more in their retirement pockets – receiving £19,803 in income per year on average.
Young women are forecast to have an average of £644,701 in their workplace pension pot (equivalent to £195,636 adjusted for inflation) at the point where they reach the state pension age, based on current savings levels. This equates to an income of approximately £42,421 a year in retirement. Despite the fact this may sound like a generous income today, adjusted for inflation, by the 2060s this will be the equivalent of just £12,873.
|Contribution rate||At-retirement pot||At-retirement pot (adjusted for inflation)||Prospective annual retirement income||Prospective annual retirement income (adjusted for inflation)|
(Based on Legal & General analysis)
Contributing to the gender pensions gap, the analysis also revealed a significant gender pay gap. By the age of 27, women are already earning £10,000 less than men of the same age. Furthermore, the research does not take into account other factors that could impact women’s pension savings, such as being less likely to hold senior leadership positions and being more likely to take career breaks for childcare, leading to an even wider pensions gap in reality.
Katharine Photiou, Managing Director of Workplace Savings at Legal & General said: “To help close the gender pensions gap, more support is needed so that women can make informed decisions about their future as early as possible. As an industry, in order to make any real change, we need to work together to get more people engaging with their pensions and ensure there is education available. We need to help women become more financially confident.
“Our research shows that young women are currently projected to have £300k less in their pension pots than their male counterparts by the time they reach the current state pension age – a shocking figure, and one that shows the gender pensions gap isn’t going anywhere any time soon!
“There are many reasons for this, including the fact that women are still paid less and are less likely to be in senior leadership positions, resulting in smaller pensions. The gender pensions gap is about more than just pay though – women are also more likely to work part-time or on reduced hours, as well as taking career breaks for childcare, as an unpaid carer or needing time off work for medical reasons, such as menopause. The combination of these responsibilities and challenges still place women at a significant disadvantage in terms of being able to reach similar savings levels as men. In addition, women often self-identify as having lower confidence when it comes to savings and investments, presenting another potential barrier to reaching the same savings levels as men.”