Why women may be facing a pension shortfall in retirement


Making sure you have enough money for your retirement is an important goal for everyone. However, new research has revealed that women may be facing a significant pension shortfall in later life when compared to their male counterparts.

Figures from a leading investment management firm, show that the pension fund of the average woman on retirement will be almost £100,000 less than the average man. In addition, further research has found that women will receive a fifth less State Pension than their male equivalents.

Women saving £87,000 less than men

New research from Brewin Dolphin has highlighted the pensions gap that exists between men and women in the UK.

On average, women anticipate that they will have £168,006 in their pension fund when they retire, significantly less than the £255,328 that the average man thinks they will have saved.

The investment manager found that just 15% of women were saving for their retirement, compared to 20% of men. Perhaps unsurprisingly, women were worried that they will not have enough in their pension fund when they retire, with a quarter saying that this was because they didn’t start their pension saving early enough.

Just 22% of women believe that they are saving enough to achieve a comfortable standard of living post-work, compared with 33% of men. And, women are saving less than men, with women putting aside 9.4% of their net income, compared to the 11.4% saved by men.

The Brewin Dolphin study also found that 21% of females said they would be relying on a State Pension in their retirement, compared to just 13% of men. Considering that a 2017 Which? report found that, on average, women received a fifth less State Pension than men (£125.98 per week compared to £153.86 per week), this could also result in an income shortfall for women in retirement.

Wayne Berry, Investment Manager at Brewin Dolphin in London, says: “Whilst our research shows that women are not putting aside as much as men, either for their future or their retirement, we can also see that they are not as confident when thinking about what they want to do with their pension pots.

“However, it is easy to get sucked into stereotypes about the differences between men and women when investing. We know that attitudes to finance are driven as much by social and demographic factors like education, employment status and financial circumstances as they are by gender. We know, too, that many more women are primary carers with part-time roles and less income to invest.”

Why women aren’t saving as much for their retirement as men

Analysis of official data on UK household incomes has suggested the gap between men and women’s pension income is nearly 40% or more than twice that of the gender pay gap. The study in the FT, which examined the 2016/17 Department for Work and Pensions family resources survey, considered all retirement income sources, including state, personal and workplace pensions and concluded that pension income for female retirees was 39.5% lower than for men that year, or around £7,000.

Sue Ferns, Deputy General Secretary of Prospect, the union, which undertook the analysis said: “These figures reveal the shocking scale of the gender pension gap and clearly demonstrate the need for urgent action to address this issue.”

So why are women’s pension savings considerably lower than men’s?

Investment expert, Maike Currie, says that different working patterns were the primary reason why women were retiring less comfortably than men. She says: “The gender pay gap means women have less to put into their pot, and subsequently get a smaller contribution match from their employer.”

She added that women were also “falling between the cracks” due to loopholes in the pension system that disadvantage those caring for children and other relatives — work still largely done by women.

In 2016, the Trades Union Congress (TUC) estimated as many as 3 million part-time female workers, including cleaners and carers, had missed being enrolled into a workplace pension by their employer because they did not meet minimum earnings criteria.

Ros Altman, former Pensions Minister, says: “The rules of the auto-enrolment system disadvantage women because unless you’re earning more than £10,000 a year, you’re not auto-enrolled at all. Many women are doing part-time work, earning less than £10,000, and are missing out.”

What women can do to ensure they have enough in retirement

If you’re a woman, there are several steps that you can take to ensure you maximise your pension savings for retirement. These include:

  • Participating in your workplace pension. By law, if you earn over £10,000 and you’re over the age of 22, your employer must contribute 3% of your eligible earnings to the scheme, while you pay 5%. With tax relief, it means that it is costing you 4% or less of earnings for a contribution of 8% of your earnings to your pension.
  • Make sure you keep track of any pensions you paid into in previous jobs. Even if you were with an employer for a short time, you may have contributed to a pension, and over time this could make a big difference to your retirement income. The government’s online pension finder can help.
  • Ensure you keep saving into your pension when you’re on maternity leave. A study by AJ Bell published on This Is Money found that a woman on average pay who takes a two-year maternity break from work could see the value of their pension fund on retirement reduced by £25,500.
  • Claim State Pension Credits if you’ve waived the right to Child Benefit. If you have a child born after April 2013, and you’ve waived your right to Child Benefit to avoid paying tax on it, the non-working parent should make a claim for the State Pension Credit. If you don’t, you could be missing out on vital credits which could reduce the amount of State Pension you receive when you retire.
  • Keep saving into your pension if you take a career break. Mothers taking a career break is one of the main reasons why the gender pension gap exists, so always enquire about continuing your pension saving when you take your career break. If you have no income at all, you can still save up to £3,600 a year into your pension, but this will only cost £2,880 because tax relief at the basic rate is automatically added to your pension savings.
  • Always take pensions into account in a divorce settlement. After your home, a pension could be the most valuable asset that you split in a divorce. However, LEBC found that 71% of divorcing couples ignore pension assets, meaning women could be missing out on essential future income.
  • Shop around with your retirement savings. The Brewin Dolphin report found that 38% of women did not know what to do with their pension savings when they retired, so taking advice is key. Exploring your options and taking your income in the most appropriate way for you could help your retirement income to go further.

If you have concerns about your pension and how it will provide an income in retirement, please contact us.

Please note: A pension is a long-term investment not normally accessible until age 55. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.

Workplace pensions are regulated by The Pensions Regulator.