Women ‘must save an extra £185,000 to reach same retirement income as men’

Women need to fund a longer retirement and shell out more on care costs, as Ella Glover explains

Young women will save an average of £185,000 less than men by the time they retire, a new report suggests.

The report, carried by Scottish Widows, used figures from the Office for National Statistics (ONS) earnings figures and a survey of more than 5,000 people about their retirement planning across Britain, to estimate the difference young women will need to make up to enjoy the same retirement income as their male counterparts.

It found that, on average, women currently in their 20s will have saved around £250,000 by the time they retire while men will save around £350,000.

With additional costs for their longer average lifespan of three years (estimated as £50,000) and potential additional care needs (£35,000), women need to save £185,000 more than men in the same time period.

This equates to an extra £210 a month, assuming someone would start saving for their pension aged 25 and retire at 68, and that a pension pot would show yearly real investment growth of 2 per cent.

Jackie Leiper, managing director of workplace savings, Scottish Widows, suggested that the findings point to the gender pay gap, which has widened by 0.9 per cent to 7.9 per cent since the pandemic according to the Office for National Statistics (ONS).

She said: “It’s well known that the gender pay gap has a damaging impact on women’s retirement prospects.

“But even if we close the saving gap, pension equality would still not be achieved.

“Women need to fund a longer retirement and shell out more on 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.”

Which? Money Editor, Jenny Ross also called on the Government to pay a lump sum to the pensions of first-time mothers.

She said: “These worrying findings reflect Which?’s previous research, which has shown that women face big disparities compared to men when it comes to saving for retirement, with mothers particularly at risk of retiring with smaller pension pots.

“To help address this pension gender gap, Which? recommends that the government should make a lump sum contribution to the pensions of first-time mothers.”

However, the report did find that the same proportion of men and women are now saving enough for a comfortable retirement (61 per cent), meaning they are saving the equivalent of at least 12 per cent of their income for their pension.

In 2007, the second year of the annual report, only 41 per cent of women were saving compared with 54 per cent of men.

Ms Leiper said: “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.”

Additional reporting by PA