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Women lag behind men in pension planning

Updated 05 December 2022

4min read

Nick Green
Financial Journalist

Nearly half of women in the UK haven’t thought about how much income they want in retirement, or how much they need to save to get it. New research suggests that women may be less pension-conscious than men – but why? Article by Nick Green.

Women pensions

Around four in 10 women in the UK are unsure how much income they will need in retirement, while nearly a quarter don’t know how much they currently have in pension savings, according to a recent survey. Although a third of Brits show poor levels of pension knowledge, women noticeably trail behind men when it comes to working out how much they need to save.  
The pension predicament of women in the UK is well publicised, largely thanks to the Women Against State Pension Inequality (WASPI) campaign, which has pushed for fair transitional arrangements following the abrupt increase in the new state pension age for women. Another campaign group, Back to 60, is pressuring the government for a return to the original state pension age. Although these fights relate to the state pension, rather than private pensions, it underlines the vital role of workplace and personal pension savings. Women in particular are discovering that they cannot rely wholly on the state pension, and also that they may receive it later than expected.

Unfortunately, the study1 by Unbiased in partnership with Opinium indicates that women in particular are more likely to be unprepared when it comes to private pensions. The findings also suggest that it is not simply wage inequality that is to blame, and that more complex factors may be at work.

Women have lower levels of pension savings

When pre-retired adults across all ages (18-55+) were asked how much they had saved in workplace or personal pensions, 1 in 5 men (20%) said they had nothing at all (excluding the people who didn’t know). However, among women this figure rose to a third (33%). Of those people who did know their level of pension savings, 30% of men had at least £150,000 in their pension pot(s), compared to just 8% of women. Women were also more likely to have low levels of pension savings, with 36% having savings below £50,000 compared to 30% of men.

To some extent this discrepancy is explained by the gender pay gap. This is the difference between the median hourly earnings of men and women, which government figures2 put at 17.3% in 2019. Up to the age of 39 the gender pay gap is small – between 1 and 2%  – but it widens significantly from 40 onwards, due to many women working part-time after having children, or missing out on promotion opportunities due to discrimination against those who took career breaks. Since workplace pension contributions are based on a percentage of earnings, lower earnings mean lesser pension contributions (both by the employee and employer). This means that for many women, there is a 25+ year period during which their pensions are growing at a significantly slower rate than the pensions of their male colleagues.

However, the gender pay gap alone does not explain all of the research’s findings. Other factors that may also be at work include access to the right information, and levels of optimism about savings.

Women may be getting less information about pensions

When asked to estimate how big a pension pot would give them a comfortable retirement, 37% of people said they didn’t know – which is not surprising. The relationship between pot size and income is not a simple one, which is why financial advice at retirement is important. However, 71% of men were prepared to make a guess, compared to only 54% of women. This might indicate more over-confidence among men and greater caution among women (many of the men guessed on the low side), but it suggests that more women feel they do not have enough information to make such an estimate. Without a target in mind, it may therefore be harder for women to know how much pension to save.

Of those who did give an estimate, roughly equal numbers of men (58%) and women (54%) reckoned they would need a pension pot of at least £150,000 to retire on. However, women generally seemed less optimistic that they would attain this level of savings.

Even more significant was the number of people who had no idea how much they had in pension savings. Among men this was quite low, at 16%. But over a fifth (23%) of women didn’t know, implying that they are not receiving the same level of information about their pension savings, or are taking less notice of it.

Lack of pension goals may be widening the gender divide

Perhaps the most significant finding, and the greatest cause for concern, was that women seem much more uncertain than men about how much income they want in retirement. Overall, 1 in 3 people (34%) would not even hazard a guess about the level of income they would wish for. But while this included 1 in 4 men (26%), a remarkable 42% of women said they didn’t know what income they hoped to have.

Again, this difference in response may be due to people trying to be realistic. Both men and women may have wanted to cite targets that they had a reasonable hope of achieving – and women already had less information about their current levels of pension savings. Nevertheless, these findings indicate that 4 in 10 women don’t have a clear target in mind for their retirement income, and may therefore be sleepwalking towards an uncertain financial future.

Women’s generally lower levels of pension savings may be one reason why they are reluctant to set themselves goals – no-one wants to fail to hit their target. This ‘pension pessimism’ among some women may turn into apathy, and a feeling that it’s no longer worth trying to build up substantial pension savings.

However, this belief is unfounded. Pension pots can build up faster than many people think, as the Unbiased Pension Calculator shows. Even someone with a gap in their pension savings (perhaps due to a career break) can make up the difference surprisingly quickly.

For instance, a woman aged 45 with an existing pension pot of just £25,000 could boost that to generate an annual income of around £8,900 from the age of 65 to 88 (based on certain assumptions), if she earns £28,000 and makes the minimum contributions. If added to the current full state pension, this would mean a total income of around £18,000 – which isn’t bad at all.

Use the Pension Calculator to set your own goals

Lack of knowledge about private pensions may cause many people to throw their hands up and ignore the issue altogether. The Pension Calculator demonstrates that just a few adjustments may be all that is needed to set people on course for a comfortable retirement. Just enter a few simple figures, play around with the results, and see how to take better control of your pension savings.

Take me to the Pension Calculator

1 Survey by Unbiased and Opinium of 2,000 non-retired UK adults in June-July 2020.

2 Annual Survey of Hours and Earnings.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.