The gap between the amount men and women are saving for retirement has grown to a record high, as women continue to be hit disproportionately by the economic downturn, according to the eighth annual Scottish Widows Women and Pensions Report. Half of women report feeling worse off than a year ago (compared to 45% of men). The report finds that the gender gap in retirement savings has increased by over 10% in 12 months. In terms of savings put aside for retirement, women are now saving an average of £776 per year less than men for use in old age – significantly higher than the £700 gender gap recorded last year. This means that a 30 year-old woman who maintains this average annual rate of saving will face a shortfall of £29,800 in today’s money, compared to her male counterpart, if she chooses to retire at 65 years-old.
Based on a sample of 5,200 adults, the report found that the number of women saving nothing at all for retirement has also increased since last year. Over a quarter of women (26%) are now failing to put anything aside for old age, compared to 23% of women who reported not saving last year. In comparison, just under a fifth (19%) of men admit to saving nothing for retirement. As can be seen in the table below, this worrying lack of provision is back at the level it was at three years ago, reversing the improvements seen in 2010 and 2011.
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Failing to save for retirement (%) |
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Men |
Women |
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2012 |
19 |
26 |
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2011 |
17 |
23 |
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2010 |
19 |
25 |
|
2009 |
15 |
26 |
Lynn Graves, Head of Business Development, Corporate Pensions at Scottish Widows said: “Important differences in lifestyle such as being more likely to work part-time or have a full-time caring role, mean women often find it more difficult to save for the long term and retirement. It has therefore never been more important for the pensions industry, Government and employers to raise awareness of this gender gap in retirement savings and help women prioritise their pensions.”
Debts taking their toll on retirement savings
A third of women (31%) are prioritising debt repayments over saving for their retirement, with the average amount owed (excluding mortgages) jumping significantly from £10,174 last year to £10,922 this year. In line with this, retirement savings rates amongst women have dropped alarmingly in the past 12 months, as a result of the need to repay short-term debt. Since last year, the average monthly saving has fallen steeply from £130 to £95 for women, whilst the average for men has risen from £174 to £185 during the same timeframe.
The fall in monthly saving carries considerable long-term consequences. For a 30 year-old woman, this £35 drop in monthly savings could reduce her final fund by £16,000 in today’s money if she retires at 65 years-old. Meanwhile, the slight increase in men’s retirement savings would see a 30 year-old man’s fund bolstered by around £5,000 by the time he reaches the average retirement age of 65 years-old.
Commitment to save prevails despite tough climate
As many Britons continue to face pressure on household finances amid wider economic uncertainty, it is clear that long-term saving is being side-lined by many women in favour of a more short-term approach; 42% of women have prioritised living expenses above saving for old age in the last year. Further proving that retirement is not a top priority for many women today, the most popular reason for increasing long-term saving is to ‘save for a rainy day’, with 31% of women citing this.
Lynn Graves commented: “This ‘rainy day’ attitude reveals that many women view their savings as a pot to dip into to cover unexpected costs at any time and not as a fund to be ring-fenced and protected for the future to pay for retirement. Although there is a clear need to balance everyday living costs with unexpected expenditure shocks, this can’t be at the expense of women protecting themselves in old age.”
However, this year’s report also showed a positive shift in attitudes amongst women who are already saving into pensions, many of whom are reluctant to cut their contributions. If faced with a 10% fall in income, most women said they would cut spending on food, clothing and going out first and just 3% would cut back on pension contributions. In addition to this, women are also well aware of the need to save for their old age, with 28% of those surveyed who plan to save more over the next 12 months doing so because they want to save more for their retirement.
Lynn Graves continued: “The recession has had a major impact on people’s attitudes to managing their finances, as the messages to ‘live within your means’ have been hammered home. While women are right to focus on making sure their debts are manageable, other sacrifices may need to be made to ensure retirement planning is in place.
“There is clearly a demand for greater financial support and financial education to help people get the balance right between managing debt payments and taking a realistic approach to long term savings.”
