Pension Puzzle

Research highlights the gender disparity in financial engagement

A recent study has identified an alarming discrepancy in financial confidence between genders. It shows that women are 33% more likely to confess to a lack of understanding about their pension operations[1]. This gap in comprehension could be a potential reason why some women seem less inclined to engage with pivotal financial products that promise better future outcomes.

For instance, the study reports that women are 38% less likely to possess Stocks & Shares Individual Savings Account (ISA) and 32% less likely to own a private pension. This reluctance towards financial engagement, coupled with other factors such as the persistent gender pay gap, could leave young British women (aged 22 to 32) with a mere £12,873 per year by their retirement in the 2060s.

Almost a third more in their retirement funds

Contrastingly, young men are predicted to have almost a third more in their retirement funds, garnering an average annual income of £19,803. Current savings trends suggest that young women can expect an average of £644,701 in their workplace pension pot (equivalent to £195,636 adjusted for inflation) when they reach State Pension age. This amount translates into an annual retirement income of approximately £42,421.

Although this might seem like a substantial income today, inflation adjustments predict that by the 2060s, this sum will shrink to a mere £12,873. Further contributing to the gender pensions gap is the significant gender pay gap. The research identified that by the age of 27, women earn £10,000 less than their male counterparts.

Compounding factors of the gender pension gap

This research doesn’t factor in other elements that could negatively impact women’s pension savings. These include lower representation in senior leadership roles, more frequent career breaks for childcare and a wider pension gap in reality. Current projections estimate that young women will have £300k less in their pension pots than their male peers by the time they hit State Pension age.

This staggering figure underlines the persistent gender pension gap. The report explains that the reasons behind this are manifold, including lower pay for women, fewer women in senior leadership positions and consequently smaller pensions. But the gender pension gap isn’t just about pay. Women are also more likely to work part-time or reduced hours, take career breaks for childcare, serve as unpaid carers or require medical leave, such as during the menopause.

Confidence barrier in savings and investments

The various responsibilities and challenges that women typically face can significantly hinder their ability to accumulate savings comparable to men. One of the key factors is the societal expectation for women to serve as primary caregivers. Whether it’s for children, the elderly or other family members, this role often necessitates taking time off from work or even quitting jobs, leading to gaps in their income and, consequently, their savings.

Furthermore, women are generally paid less than men, a stark reality reflected in the gender pay gap that persists globally. This income disparity means that women have fewer resources to allocate towards savings, putting them at a significant disadvantage.

Lower confidence in savings and investments

In addition to these systemic obstacles, the research has highlighted another critical issue – women’s self-perception of their financial capacities. Some women tend to identify themselves as having lower confidence in savings and investments.

This can be attributed to various factors, but this lack of confidence can be a psychological barrier, preventing many women from actively participating in financial planning and decision-making, further widening the savings gap between men and women.

Source data
[1] Analysis based on the following research and assumptions: Opinium Research conducted 2,000 online interviews of people aged 22-32 between the 15th and 29th August 2023.

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