QED for young women on IWD

Scottish Widows have done a fantastic job on International Women’s Day highlighting the Gender Pension Gap with front page banners in several of today's national newspapers.

The Gender Pension Gap is the difference between the pension pots of men and women when they retire.

Scottish Widow’s latest Women and Retirement Report found that on average, women today are on course to retire with £123,000 less in their pension than men. Men on average retire with £260,500 and women on average retire with £137,400. This reduces for younger women, but only slightly.

Income differences between men and women are driven by structural factors such as over representation in part-time work (72% of part-time workers are women), greater childcare responsibility and career breaks. The net result is that the average man earns over £30,900 a year compared to the average woman on over £21,900. These factors have a direct impact on pension savings.

The gaps that exists for today’s retirees are particularly stark. On average, women live longer than men which means they need to be able to live off their retirement savings for longer, they are also more likely to need care during their later life.

Previous years reports estimated that as a result, the average woman would need £85,000 more in retirement savings than the average man for a comparable quality in life in retirement.

The current numbers I feel should be taken with a pinch of salt as they are based on pension funds accrued over the last 40 years. The above scenarios are seen day in day out by financial advisers and families work out these imbalances by holding other income paying investments in the lower earning spouse’s name. A pension isn’t the only way to save for retirement, in fact, for basic rate taxpayers, the numbers stack up for an ISA in preference to a pension anyway.

The real takeaway for me here is education. While baby boomers can get by with a large male pension fund counterbalanced by a female property portfolio, Generation X through to GEN Z won’t be as fortunate.

The disappearance of final salary pensions, the inability to get on the housing ladder, the changing workplace landscape (more jobs for shorter periods) and the lower marriage / higher divorce rates mean saving for retirement has never been more difficult.

Young women should take the following steps to ensure they minimise their personal gap.

1. Get a head start in your 20’s. The earlier you start, the easier it gets.

2. Take advantage of your workplace pension. And speak with someone about fund choice, don't just stick it in the default lifestyle option.

3. Talk about pensions. In fact, talk about finances full stop. With your parents, with your friends, with your TikTok followers, and with your parent's financial adviser

We offer a generational wealth service and the children of all of our clients are free to speak with us about any financial planning issues, in particular decisions around making choices for their auto-enrolment pension.