Women Still Lagging Men in Retirement Savings

Scottish Widows survey shows more women engaged in saving for later life, especially among the young, but the gender gap remains

Annalisa Esposito 18 November, 2019 | 10:53AM
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Women are starting to close the gender savings gap as more females save for the future than ever before, according to the latest Women and Retirement report from Scottish Widows.

The annual study looks at the savings gap between men and women, and while the number of women savers is at the highest level since the launch of the report 15 years ago, there is still a great gender divide.

Scottish Widows says just 57% of women are saving "adequately" for the future - where adequately means at least 12% of income. That compares with 61% of men who are deemed to be saving enough. 

The gap is, however, closing. In 2006, just 41% of women were saving enough compared with 49% of men at the time. “The good news is that there has been a great deal of progress”, says Jackie Leiper, distribution director at Scottish Widows. “More women than ever before are saving – and they are saving more.”

Rising Incomes

Scottish Widows says much of the progress can be linked to womens' growing incomes. The number of women who save adequately has risen most significantly among those who earn more than £40,000 a year. Lower and middle earners, meanwhile, are not managing to set aside as much - just 47% of those earning between £10,000 and £20,000 are deemed to be saving adequately, compared with 65% of women earning more than £40,000. 

There is also a regional divide, with Londoners making the most progress in increasing their savings. However, Scotland is leading the way overall, with 60% of women in the region saving adequately for retirement compared with 52-56% across the rest of the UK. 

Helen Morrissey, pension specialist at Royal London, says: “The research shows that progress has been made in improving women’s retirement prospects. This is largely due to auto-enrolment, which has brought many women into the workplace pension regime.”

Indeed, since the introductio of auto-enrolment in 2012, the number of people saving into pensions has increased dramatically. But Leiper points out that currently the minimum contribution under auto-enrolment is 8% of earnings and many people do not realise that this is not enough to maintain their standards of living in retirement. 

Women are particularly affected by this because they are more likely to work part-time. Females are also more likely to take breaks from savings throughout their working life because of career breaks, maternity leave and divorce. 

Morrissey adds: "Even if they do return to work, they often do so part-time on lower wages or they sacrifice pension saving to service eye wateringly high childcare bills. It blows a hole in women’s finances that is almost impossible to plug.”

New Generation

However, the latest data shows a step change in saving habits for the younger generations. The proportion of women aged 22 to 29 who are saving enough has risen by 17 percentage points over the past 15 years to 51%, while the number of those aged 30 to 39 saving enough is up by 12 percentage points over the same period.

This means the savings gap between young and older women is radically closing; with younger women today saving around £6,000 a year more than women of the same age in 2007. The savings gap between the genders is also narrowing from around 8% in 2006 to around 4% today. 

savings gap

But despite the progress being made, the value of womens' pensions still significantly lags mens' as the earning gaps remains stubbornly in tact. Young women today could end up with a pension pot some £78,000 smaller than their male counterparts, leaving them with nearly £3,000 a year less in annual retirement income. 

Morrissey says: “We need to see more support offered to women with caring responsibilities if we are to really see a reduction in the gender pension gap.”

However, the 1.7 million self-employed women in the UK are out-saving their male counterparts. Some 46% of self-employed women are saving adequately compared to 38% of men.

“The progress that has been made over the past 15 years is heartening, but an ambitious set of reforms are needed to tackle the challenges women continue to face in planning their retirement," says Leiper "This will help to drive another 15 years of progress and ensure more women than ever are able to enjoy a satisfying, well-earned retirement

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Annalisa Esposito  is a data journalist for Morningstar.co.uk

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