How advice can help bridge the gender retirement gap

Published on October 24, 2024 by Andrew
A hand placing a wooden block to bridge a gap

FTAdviser recently reported that more than half of UK women don’t think they’ve saved enough to sustain them in retirement.

The Fidelity International survey results suggest that women are making changes to their financial plans as a result of continuing cost of living pressures in 2023/24. These changes include cutting pension contributions.

These decisions, among other factors, may have played a part in widening the gender retirement gap, which hit 45% in 2023.

A pension shortfall can have huge ramifications in later life, from forcing you to work later or sacrificing your desired lifestyle to running out of money when you need it most.

Thankfully, advice can help.

The cost of living crisis has forced some savers to sacrifice future financial security to cover costs in the present

Paying your future self is a crucial part of any budgeting strategy, but the cost of living crisis has made this harder.

Head of investor servicing at Fidelity International, Jackie Boylan, says of the recent report: “The cost of living crisis has resulted in many women prioritising their most immediate financial needs, putting their longer-term financial future at risk.”

This includes around 12% of surveyed women who admitted to reducing their pension contributions by an average of £173 a month. Around half (51%) blamed a lack of funds for not saving more into their pension, with too little monthly income left after essential costs are covered.

Boylan concluded that better financial education and support systems were needed to help women navigate retirement challenges. “Encouraging women to seek professional financial advice and explore alternative savings strategies can make a significant difference in enhancing financial security in later years”. This is where The Pension Planner can help.

3 key reasons behind the continuing gender retirement gap

1. Care responsibilities

“Traditional” gender roles mean that it is often women who give up work to raise children – and to care for older relatives. Time out of work affects career progression, salary, and workplace pension contributions.

Aviva research from 2022 found that the gender pension gap widened significantly from the age of 35, around the average age when UK women have a first child.

BusinessNews confirms, meanwhile, that more than half of women who return to work after having children earn less than they did before maternity leave. This has huge implications for pension contributions and progression opportunities in the second half of women’s careers.

2. The “pink tax”

Despite the abolition of the so-called “tampon tax” in 2021, Fidelity reports that consumer products aimed at women are still widely accepted to be more expensive than male equivalents.

Healthcare is said to be more expensive too, with women spending £1.5 billion more than men on medical-related expenses each year. And these costs add up, especially during a cost of living crisis.

3. Menopause

Talking about menopause is still seen as taboo in many workplaces, with 65% of women experiencing menopause symptoms feeling unsupported at work.

A recent Royal London report finds that even mild symptoms can lead to women reducing their hours. This comes at a cost of around £63,000 lost from women’s pension pots (compared to a male counterpart remaining in full-time work).

Severe symptoms, though, are said to cause around 1 million women to leave work entirely, leaving a £126,000 shortfall in their pension savings compared to a comparable male.

Expert financial advice can help individuals bridge the gender retirement gap and build toward a dream retirement

It’s never too early or too late to make changes

Starting to save into your retirement fund early means that you afford to put a lower percentage of your income aside each month. But it’s also important to remember that it’s never too late to start saving or to make changes to your pension contributions.

Fidelity analysis found that as a 45-year-old woman earning £28,765, you could boost your retirement savings by £17,000 with a contribution increase of just 1%. A 5% increase, meanwhile, could see your savings grow by an extra £85,200.

Check in with your workplace pension and enquire about increasing your contributions if you can afford to. You might even find that your employer will match your increase.

Break taboos by discussing menopause with your bosses

Menopause could arrive at a time when you’re earning the highest salary of your career. This is why a break in employment due to menopause symptoms can have such a huge impact further down the line.

Communication is key and yet 97% of women surveyed by Royal London didn’t disclose their symptoms to their manager. Breaking this taboo, by encouraging open and frank discussions is key to closing the gender gap in the longer term.

Acknowledging a shortfall can help you start to bridge it

In 2021, Scottish Widows released its ‘Women and Retirement’ report. It suggested that a 25-year-old woman would need to save an extra £116 a month until she retires to achieve a pension fund comparable to that of a man of the same age.

This is a shocking statistic, and while advice alone can’t alter the startling reality, it can help you to make changes to your savings, investments, and budgeting. This can help you to focus on your retirement dreams and building the life you want after work.

Get in touch

If you need help to bridge the gender retirement gap and manage your long-term retirement plans, whatever they look like, get in touch. Email info@thepensionplanner.co.uk or call 0800 0787 182.

Please note:

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

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