Ryan FowlerMore than a third of women face poverty in retirement, according to Scottish Widows’ latest Women and Retirement Report.
The findings show that 36% of women are at risk, with career breaks continuing to play a major role in widening the gender pension gap.
The research found that more than half of women at or near retirement have taken a career break, compared with just 12% of men, and women are 12 times more likely to take time out of work to raise children.
As a result, many women experience loss of income and gaps in pension contributions that have long-term financial consequences.
By age 55, one in four women have been out of work for more than five years. Scottish Widows calculated that a woman taking a five-year career break at age 35 would reach 67 with a pension worth £512,000, around £69,380 less than someone who did not take a break, reflecting both missed contributions and lost investment growth.
The research also shows that although women tend to manage money slightly better than men during career breaks, they are less likely to plan for them financially.
Two-fifths did not plan at all, and more than half never considered how taking time out of work would affect their retirement. Around 42% said a career break reduced their ability to save, compared with 37% of men.
This year, Scottish Widows calculated the median total private pension for women at retirement to be £173,000 versus £286,000 for men.
The £113,000 gap represents a 32% difference and has widened since last year’s estimate of £100,000.
Susan Hope, retirement expert at Scottish Widows, said: “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%) 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% 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.”
Dame Denise Lewis (DBE), former Team GB track and field athlete, working with Scottish Widows on the launch of the Women and Retirement Report, said: “Throughout my sporting and punditry career, there have absolutely been times when I’ve stepped away from work, whether that was due to injury or raising my family.
“Those experiences taught me first-hand how important it is to have a financial plan that gives you security when your income is more up and down – something so many women can relate to.
“And crucially it’s not only a challenge at the time, it also has a real impact on our futures. The more we can encourage women to start those vital kitchen table conversations about what their future looks like and how they’ll afford it, the better.”
