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More than half of UK women expect to run out of money in retirement but say the cost of living crisis means they cannot afford to make higher pension contributions, according to a stark new report.
Fidelity International Sixth Annual Conference Women and money One study found that 52 percent of women did not believe they would have enough money to maintain their income in retirement.
The detailed survey of 2,000 UK adults found that more than one in 10 working women (12 per cent) had reduced their pension contributions in the past year, and those who had done so had done so by an average of £173 a month.
Just over half (51 percent) said a lack of funds after covering their essential expenses, such as rent or mortgage, bills and childcare, was preventing them from saving more for retirement, while 22 percent said they were redirecting funds toward other savings goals, such as buying a home.
Fidelity’s six-year study shows a “persistent and significant” gender gap in pensions that disproportionately affects women’s retirement prospects.
Its latest report found that the average pension wealth of a non-retiree woman was £42,600, almost 45 per cent less than the average wealth of a non-retiree man, £76,700.
This gap is particularly pronounced among younger adults aged 18 to 34, where men’s pension savings are almost double those of women (an average pot for men of £59,700 compared to £30,400 for women).
Jackie Boylan, head of investor services at Fidelity International, said the latest data underscores the stark reality faced by many women as they navigate a complex financial landscape.
“With so many women worried about not having enough money for their retirement, we need to take steps to provide better financial education and support systems to help women meet these challenges,” she said.
“It is encouraging to see that the new Chancellor, Rachel Reeves, has committed to tackling the gender gap in finance. Closing this gap is a crucial step towards achieving economic equality and requires proactive measures to ensure that everyone, regardless of gender, can retire with confidence and security.”
Fidelity has launched a The power of small quantities Online calculator that allows women to model how even small changes could have a significant impact on their final retirement fund.
For example, if a 45-year-old woman earning the average UK salary of £28,765 increased her pension contributions by just 1 per cent of her salary, this could boost her retirement pot by £17,000 at age 68. Contributing an extra 5 per cent of salary could secure an additional £85,200 (assuming 5 per cent average annual investment growth and not taking inflation into account).
For younger people, the impact of small increases could be even greater because of the power of compounding. For a 25-year-old earning the same salary, increasing pension contributions by 1 per cent of salary could generate an extra £74,000 in retirement. Contributing an extra 5 per cent could boost your pension pot by an extra £370,200.
These amounts could be even higher if employers offer to match additional staff contributions.
“Our data shows that it is never too late or too early to make significant changes to pension contributions,” Boylan added. “Even if you start later in life, the effect of small, regular increases can significantly improve financial security in retirement. For younger savers, starting early and making consistent contributions, no matter how small, can result in a substantial retirement pot.”