Gender pay gap: It is harder for UK women to save for retirement

Findings from GlobalData’s 2021 UK Life & Pensions Survey reveal that women will have considerably smaller pension pots than men when they reach state pension age. The leading data and analytics company notes that women are still hindered by the gender pay gap and the need to take breaks from work for childcare.

Beatriz Benito, Senior Insurance Analyst at GlobalData, comments: “In GlobalData’s survey, a total 40.4% of working women in the 60–64-age category had what we would class as a ‘medium-sized’ pension pot – anything between £10,000 and £30,000. Compare that to men, a similar proportion had an ‘extra-large’ pot, worth more than £100,000. Simply put, the gender pay gap is still a pressing issue and is making it easier for men to save for retirement over their working lives.”

GlobalData’s latest report, ‘UK Pensions Market 2021’, shows that individuals receiving the average amount of the new state pension pay will need to supplement their annual retirement income by more than £11,500 to achieve a moderate lifestyle in retirement.

Benito continues: “Not only will women need higher top-ups than men, given that their state pension pay is lower on average. they will also need to supplement their state pension for longer due to a longer life expectancy. For a retirement income of £20,200 a year, women will need pension pots worth over £200,000 – almost £50,000 more than men, without taking inflation into account.”

Individuals commonly retire at the state pension age, at which point they can claim the state pension. As life expectancy of women in the UK is 83.1 years, compared to 79.4 years for men, they will have to supplement their state pensions for around 17 years if they retired at state pension age – compared to 13.4 years for a man. We need to turn this on its head so that women get substantially larger pension pots than men.

Benito adds: “The gap in pension savings means that many women will effectively retire with a lower retirement income than men, coupled with a lower state pension pay than men. The state pension age had traditionally been lower for women than men, but over the recent years it has been increased sharply, bringing it on par with men. There is optimism in the industry that, as the gender pay gap lessens, the difference in pension pot sizes will narrow.”

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