A growing number of women could be facing financial hardship just seven years into retirement, new analysis has revealed.
Many are at risk of seeing their pension savings run dry far earlier than anticipated, exposing the stark reality of the gender pension gap.
Government figures released this week reveal a significant divide in retirement savings between men and women. According to the Department for Work and Pensions, women aged 55 to 59 have an average of £81,000 saved, compared to men in the same age group who have around £156,000 — a gap of 48 per cent.
This difference could mean vastly different retirement experiences. Financial services company interactive investor calculated that a woman retiring at 67 with £81,000 in savings and withdrawing £11,000 a year would exhaust her pension pot by age 74. A man with £156,000 could continue withdrawing the same amount until around age 84.
The analysis assumed five per cent annual investment growth and two per cent inflation, based on retirees needing around £23,000 a year — including £11,000 from private savings and £11,900 from the full state pension.
Why is the pension gender gap such a problem?
Because women generally live longer than men, their smaller pension pots must stretch further — leaving many more vulnerable to financial insecurity later in life.
The pension gap stems from deep-rooted inequalities in the workplace. Women are more likely to take career breaks for childcare, work part time or earn less overall, which leads to lower pension contributions over time.
Camilla Esmund, Senior Manager at interactive investor, said: “Women still face multiple and systemic hurdles when it comes to building pension wealth. The pay gap plays a key role here, as do other barriers.
Career breaks for family responsibilities are especially damaging to pension growth. Women often reduce their hours or leave work altogether to care for children or elderly relatives, missing out on crucial contributions and employer top-ups.
“They are more likely to work part-time or take time out of the workplace to care for loved ones, leading to a lifetime of lower contributions and the potential for a smaller pension pot in retirement,” Esmund added.
The impact reaches beyond personal finances. As women live longer, they are more likely to spend their later years alone, dependent on dwindling savings or the state pension.
What hardships do female pensions face and what can be done about it?
“Despite having lower pension values, women live for longer on average in retirement, and are often left struggling financially in old age once their pension wealth has dwindled,” Esmund warned.
However, experts point to several ways women can improve their retirement prospects. Starting pension contributions early can make a major difference, thanks to the effects of compound growth.
Scottish Widows has found that a 25-year-old earning £30,000 who increases their pension contribution by just two per cent each year could end up with nearly £40,000 more by age 60.
The firm recommends total pension contributions of between 12 per cent and 15 per cent of salary to ensure better outcomes in later life.
Employer-backed pension schemes also offer valuable benefits, including matching voluntary contributions up to certain limits — effectively doubling the money saved.
During maternity leave, most employers continue contributions based on pre-leave salaries for up to 39 weeks, though personal contributions fall, as they are based on statutory maternity pay. Advisers recommend maintaining pre-leave contribution levels wherever possible.
Partners can also help bridge the gap. But research by Moneyfarm shows 42 per cent of men are unwilling to contribute to their partner’s pension during maternity leave.
“Encouraging open conversations about financial planning and the importance of supporting each other’s long-term financial goals is a step towards achieving true gender equality,” said Carina Chambers, pensions technical expert at Moneyfarm.