More than a third of women face poverty in retirement, according to Scottish Widows’ latest Women and Retirement Report.
The report shows that 58 per cent of women at or near retirement have taken a career break, while for men it is 12 per cent. It notes that women are 12 times more likely to take time out of work to raise children. Additionally, one in four women aged 55 has been out of work for more than five years.
Scottish Widows estimates that this pattern can reduce retirement savings by around £70,000. A woman who takes a five-year career break at age 35 is projected to reach age 67 with a pension of £512,000 which is £69,380 less than a woman who remains in continuous employment.
The data shows that 61 per cent of women manage their money effectively during career breaks. The figure for men is 58 per cent. The report also shows that women are less likely to plan for time out of work, with two-fifths having no financial planning for their break. More than half did not consider the impact on their retirement outcomes. Meanwhile, 42 per cent of women reported that the break reduced their ability to save, compared to 37 per cent of men.
Scottish Widows calculates that the median private pension at retirement is £173,000 for women and £286,000 for men, which creates a gender pension gap of £113,000.
Scottish Widows Retirement Expert Susan Hope says: “Millions of women in the UK are living with the gender pension gap and they don’t even know it. To achieve true equality in retirement, we need to make sure career breaks don’t break women’s future financial security.
“There are a couple of straight-forward ways to help address these gender pension concerns. We need to improve awareness and take-up of shared parental leave policies. This policy is critical, yet four in five (80 per cent) women who had children in the last 10 years didn’t take advantage of it. This represents around 2.7 million working mothers, and 8 per cent revealed that their spouse’s workplace was not supportive.
“Separately, spouses should be actively saving into women’s pensions during any career breaks, if possible. This is also known as third party contributions and, while often overlooked, is a helpful financial planning tool. Not only can it maximise tax relief for those who have used up their allowance, this can help to plug gaps in pension contributions while earning power is limited.
“Employers also continue to play an important role in pension contributions during maternity leave. Fortunately for women, employer contributions in a workplace scheme are often calculated based on their pre-leave salary.”
