Women will require £100,000 more than men to bridge the savings gap, an additional £50,000 to cover longer life expectancy, and an extra £35,000 to cover associated care, according to Scottish Widows.
According to the latest Scottish Widows Women & Retirement Report, young women will need to save an extra £185,000 during their working lives to enjoy the same retirement income as men. This entails saving an additional £210 per month from the age of 25 until retirement.
Several recommendations are made in the report to close the gender pensions gap. The gender pension gap is made up of a savings shortfall and the need to fund a longer retirement because women, on average, live longer than men, which leads to higher healthcare costs.
The report reveals that women in their twenties will have saved only around £250,000 by retirement age. Men, on the other hand, will have an average net worth of £350,000.
In addition, according to current estimates, a 25-year-old man today will live to the age of 86, while a woman will live to the age of 89. With women living three years longer than men, the average woman will need £400,000 in her pension pot to match a man’s £350,000 retirement income.
One in every four 60-year-old women will live to be 94, and one in every ten will live to be 98.
Longer lives necessitate a greater need for eldercare. According to estimates, women spend 460 days in care homes on average, while men spend only 100. With an average care cost of £679 per week, women can expect to spend £35,000 more than men.
Ultimately, this means that women must save an additional £185,000 to enjoy the same retirement lifestyle as men, which would require an additional £2,500 per year, or £210 per month, from their mid-20s until they retire.
Scottish Widows managing director of workplace savings Jackie Leiper says: “It’s well known that the gender pay gap has a damaging impact on women’s retirement prospects. But women face a double whammy: even if we close the pension saving gender gap, pension equality would still not be achieved because women need to fund a longer retirement and spend more on associated 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.”
Leiper added: “After 17 years of reporting on gender differences in our Adequate Savings Index, it’s encouraging to see the gap finally closed. However, this must come with a health warning, as women remain disadvantaged by persistent inequalities in our society.
“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.”