Study: Girl needs to save from age 3 to bridge pension gender gap.
Data from the Pensions Policy Institute reveals that women retiring at 67, the new UK state pension age from 2026, would require an additional 19 years of work to match men’s average pension savings. Women are projected to have saved £69,000 on average, while men are expected to have £205,000 saved.
Published by the Pensions Policy Institute and Now: Pensions, the data indicates that within the existing framework, to narrow the “gender pension gap,” a girl would have to commence saving at the age of three to achieve parity with men in retirement funds. Factors such as career breaks, caregiving duties, expenses for childcare, and reduced earnings collectively contribute to this inequality.
Since automatic enrollment in workplace pensions begins at 22, the researchers argue that the 19-year disparity implies that “by age three, girls are already lagging behind boys in preparing for their later years.” Nonetheless, women typically outlive men by an average of about seven years, necessitating that their retirement funds also endure longer.
Now: Pensions advocates for the elimination of the £10,000-a-year earnings threshold for automatic enrollment into workplace pensions, as it disproportionately excludes numerous women engaged in multiple jobs, part-time work, or freelancing.
The UK state pension age, currently at 66, is scheduled to increase to 67 from 2026 to 2028 and is anticipated to further rise to 68 by 2044. However, recent research indicates that it might need to be raised to 71 for individuals born after April 1970.
On Wednesday, industry statistics revealed that the projected sum required to sustain a “moderate” retirement lifestyle surged by £8,000, marking a 34% increase within a year due to the cost of living challenges and shifts in behavior.
The Pensions and Lifetime Savings Association has introduced the “retirement living standards” to illustrate the varying levels of life in retirement—minimum, moderate, and comfortable. Last year, it estimated that a single individual needed approximately £12,800 annually to meet the minimum standard, but this year, the figure has risen to £14,400.
The revised benchmark for achieving a moderate standard of living in retirement now stands at £31,300 annually for a single person, compared to £23,300 a year earlier. Similarly, to reach the comfortable standard, the updated amount is £43,100 per year for an individual, up from £37,300.
According to pension provider Scottish Widows, securing a guaranteed annual income of £23,300 for life would necessitate a pension fund of approximately £500,000. However, attaining an income of £31,300 would require accumulating a pension pot exceeding £750,000.
The latest findings from the Pensions and Lifetime Savings Association (PLSA) acknowledge the surge in household expenses, particularly in food and energy costs. Additionally, the research underscores the growing significance individuals place on spending quality time with family and friends outside the home, reflecting shifting priorities following the COVID-19 pandemic.
