By Steven Cameron, Pensions Director, Aegon
At age 30, women need to contribute an extra £21 a month to close the gap on men. But, by age 50, this has risen to an extra £360** a month, showing it pays to address any shortfall in savings as early as possible.
Women often lose out financially as they’re more likely to take career breaks to have a family or care for elderly parents, which is compounded by lower pay.
According to our research, the Aegon Retirement Confidence Survey, disrupted working patterns mean women are less confident about retiring comfortably. In fact, half of women say they’re not confident about having enough money when they retire, compared to a third of men.
Bridging the gap
There are a number of steps women can take to increase their retirement savings and bridge the pensions gap. A key starting point is making plans and reviewing savings at an early stage.
Without a clear overview of total savings, it’s impossible for anyone to set a realistic plan or be able to assess whether they’re on track for retirement. The fact that more than one in four women don’t know how much they’ve saved, compared to just 9% of men**, puts them at a further disadvantage.
Estimating individual income needs in retirement also helps to set a realistic savings target. However, 42%** of women have never thought about how much they’ll need, creating a danger that over the course of their career they’ll not save enough and will have to work longer or potentially run out of money in retirement - a prospect no one would relish.
Gaps in your pension contributions leave you worse off in retirement, but for women who take time out of their career, this is unavoidable and could mean they have to work longer to make up the shortfall. Our figures show that women in the early part of their career are within touching distance of men’s overall savings – by the time flexibility offered by pension freedoms are an option at age 55, the pension pots of men are out of sight. While not widely known, pension contributions can continue during career gaps if the household can afford them.
Let’s not forget that in addition to the issues we’ve talked about above, women live longer. This means that their retirement could potentially last a lot longer, and could therefore be more expensive. According to the Office for National Statistics, a 65-year-old man in the UK will live for an average of another 18.5 years, while a woman of the same age can expect to live for 20.9 years
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