Nine in ten women aren't prepared for retirement
Women aren't financially prepared for the retirement that they want, according to new research.
An astonishing 90% of women aren’t prepared for retirement.
Just 10% are saving enough to meet their retirement income targets, according to research from Aegon UK. In contrast 14% of men are on track for the retirement they dream of.
Following the introduction of new pension freedoms last year women are saving 14% more into their pension and the number that are going to meet their needs in retirement has doubled since then, but it still lags behind men.
“Despite encouraging signs for women, the truth is that their expectations are simply not lining up with reality,” says Kate Smith, head of pensions at Aegon. “The value of women’s pension pots is well under half of their male counterparts but they currently expect to retire at 63, a year earlier than men.”
The pay gap
On average women have just £20,000 saved in their pension; that is less than half the £52,500 the average man has.
A key reason for this is the gender pay gap with women left with less money each month after they’ve met their essential costs. Each month men save £85 more into their pension than women, meaning over a year women are setting aside £1,020 less.
The lower pay many women received compared to their male counterparts also has a knock-on effect in terms of auto-enrolment. Pension contributions via workplace pensions are made as a percentage of earnings. Women earn less, and therefore, less goes into their pension and their employers make a smaller contribution too.
For example, if a man earns £35,000 a year and pays 8% into his pension with a 3% employer contribution that means his monthly pension contribution is £321, including his employer’s share. A women working at the same firm doing a similar job earns £30,000 and gets a total pension contribution of £275 a month. Over a year that means the woman puts £550 a year less into her pension than her male colleague.
Women may have to work longer
It appears many women aren’t setting retirement goals that reflect the rising State Pension age. The average woman wants to retire at 63, two years before the State Pension will kick in for most of them, but they aren’t saving enough to cover that gap.
“This target retirement age comes against a backdrop of an increasing State Pension age for women,” says Smith.
“With this in mind, they’ll need to fund an additional two years of retirement from an inadequate pension pot before the State Pension kicks in, unless other income, such as their partner’s or retirement savings is available.”
The research also found that women aren’t keeping as close an eye on their pension pots as men. Just 21% of women have checked the performance of their pension within the last six months, and only 19% have actually reviewed their retirement plans. In contrast, 27% of men have checked on their pension performance and 25% have acted to review their plans.
How you can improve your position
Knowledge is power so the first step is to get a State Pension forecast. This will tell you how much income you can expect to receive from the Government when you retire, and what age you will start receiving it. Read How to get a State Pension forecast for more.
Next, take the time to hunt down forgotten pensions. Many of us sign up to a workplace pension then forget about it when we switch jobs. The Pension Tracing Service can help you track down lost pensions. Once you’ve found all your pension pots, find out how much you have saved and whether it is worth consolidating them all.
Once you know exactly how much you have and what income you can expect in retirement you can use online tools to work out how much more you need to save.
If you are facing a significant shortfall consider delaying your retirement so you can build up a bigger pension pot.
“Auto-enrolment will support women’s savings levels, as the mandatory contribution levels increase, but more must be done to ensure that women, who often face a disrupted working life, are given the support to help them save more and bring their retirement expectations in line with reality,” says Smith.
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