Jill Henderson Head of Business Development, Scottish Widows
For the past 19 years we've been reporting on women's financial resilience in our industry-leading Women and Retirement Report.
Over that time, we've highlighted the gender pension gap and how much worse women's retirement prospects are compared to men. That's still true today, despite the positive changes brought about by auto-enrolment since 2012.
Gender gap persists
As our 2023 Women and Retirement Report shows, on average women are on track for £12k per year of income in retirement in today's money, compared to £19k for men. It's a figure based on Scottish Widows' National Retirement Forecast that includes their private pension pots and state pension, with housing costs deducted.
That's a gender gap of £7,000 a year. Overall, women are on track for a £148k private pension pot compared to £234k for men, in today's money.
There are, though, some groups of women whose retirement outcomes are much more precarious. Divorced, single women and single mothers are on course for much worse outcomes without a partner to share living or childcare costs or benefit from a man's higher pension savings.
Most women don't discuss pension assets during divorce, usually because they don't know they can or should; or they have no idea of the potential value of a spouse's pension. Yet a pension can be worth more than the family home.
The result is that around 60% of divorced women are likely to have less than a minimum lifestyle in retirement compared to 39% of women generally. Just 10% are on track for a comfortable lifestyle.
Single mothers - and there are 2.5m of them in the UK - face the biggest challenges of all, with their retirement income expected to be just £10,000 a year as they battle a lack of affordable or available childcare and cut work hours to look after their children.
Those are stark figures and it's why I'm so motivated to help drive much-needed change for a multifaceted, societal challenge, which has some overarching drivers.
Firstly, women typically embark on careers or roles with lower pay. The average woman who is saving towards a pension earns £28k whilst the figure for a man saving into a pension is £43k. When we layer on taking time out for parental or caring responsibilities they face a triple whammy of detractors for their future pension with decreased earnings, decreased pension contributions during their period of absence, and there is also the decline in career progression and earnings potential when they return.
Secondly, childcare costs are vast. On average it costs £14k per year for full-time childcare at a nursery for a child under two in the UK. So, we can understand why reducing working hours is attractive. As many as 37% of women have given up work to look after their children, with cost being a key factor.
Childcare responsibilities are still unequal, with 50% of fathers saying they share childcare equally but only 31% mothers believe this is true. The good news is the younger generation is splitting childcare more equally.
Finally, cost-of-living pressures can make saving harder.
What can we do? And by ‘we' I mean government, employers, advisors and providers all working together to drive change for the better.
Expand auto-enrolment reforms
We need to expand auto-enrolment reforms as the current 8% contribution levels aren't likely to be enough. We think that 15% is more realistic.
Divorce changes
Pension assets should be made a mandatory part of legal proceedings - or perhaps a joint ‘family pension' could be split should a couple divorce.
Greater equality and childcare support for parents
Good, affordable, available childcare, especially for single parents and lower earners, is vital. The government's proposal to introduce free childcare from 18 months and increase the number of hours by 2025 is very welcome.
No doubt there's more that can be done. Engagement certainly springs to mind.
We want things to be better for the next generations so that they're not financially vulnerable in later life.
Read the Women and Retirement Report.
