By Helen Thomas, Chartered Financial Planner
In November I had the privilege of joining a Scottish Widows webinar unveiling key findings from their 2024 Women and Retirement Report. The session was both thought-provoking and eye-opening, shedding light on the strides we’ve made – and the significant work still ahead – to close the gender pension gap.
On a positive note, we’ve seen meaningful progress over the last 20 years. Policies such as Auto-Enrolment (2012) and the New State Pension (2017) have brought millions into the fold of retirement saving, empowering more women to secure their futures. These changes have laid a strong foundation, proving that impactful policy can drive positive change.
However, the report also reveals a sobering truth: at our current pace, it will take another generation – 20 years – to achieve true equality in retirement outcomes. For millions of women, this gap represents more than just numbers; it’s a barrier to financial security, independence, and opportunity.
Closing the gender pension gap isn’t just about savings—it’s about redefining financial confidence, access, and equity for women across all stages of life. To accelerate change, we must address systemic challenges head-on and work collaboratively to level the playing field.
Key Areas for Improvement
To accelerate progress, action is needed in several critical areas:
- Employment and Pay – Closing the gender pay gap and improving employment rates for women.
- Pension Contributions – Encouraging more women to save into pensions and ensuring they qualify for the full State Pension (35 years of National Insurance contributions).
- Confidence to Invest – Building women’s confidence to take charge of their finances and make informed investment decisions.
- Joint Financial Planning – Normalising shared financial planning between partners, particularly in marriage and during divorce.
The Facts Behind the Pension Gap
- Retirement Poverty Risk – According to the Scottish Widows Report, 42% of women and 35% of men are at risk of poverty in retirement.
- The Defined Contribution Gap – Women are on track to have an average of £130,000 less in their pensions at retirement than men (National Retirement Forecast).
- Childcare Challenges – for many women, childcare costs are a major barrier to earning and saving. Nursery costs for under-2s can consume 58% of take-home pay, forcing many mothers to reduce working hours or leave work entirely.
- Divorce and Pensions – Shockingly, 60% of divorced women don’t discuss pensions during divorce negotiations, despite pensions often being the second largest asset after the family home.
- Annuity Risks – 85% of annuities are purchased on a single-life basis, leaving surviving spouses without income when the annuity holder dies.
- Women and Investing – Women across all age groups are less likely to invest outside of pensions, potentially missing out on wealth-building opportunities.
- State Pension Dependency – Women rely heavily on the State Pension, which prevents 5 million women and 4 million men from falling into poverty in retirement.
The Role of Financial Planners
Financial Planners play a pivotal role in narrowing the gender pension gap. Here’s what we are doing at FPC to make a difference:
- Family-Centric Planning – Advocating for shared financial planning across the family, including equalising pension contributions, topping up both spouses’ ISAs and pensions, and recommending joint-life annuities when appropriate.
- Divorce Planning – Ensuring divorcing clients consider the long-term benefits of pensions, not just their current value, so both parties have security in retirement.
- Starting Early – Helping families set up Junior ISAs and pensions for children and grandchildren. Research shows that £1 saved before age 10 can grow to four times as much as a pound saved in your 30s, thanks to compound interest.
- Financial Coaching – Guiding clients through economic cycles and avoiding cognitive biases to ensure smart, informed financial decisions.
- Financial Education – Promoting financial literacy in schools to help the next generation – young women and men – build financial confidence, wealth, and security.
- Pro Bono Work – Supporting initiatives like Merseyside Women Of The Year (MWOTY) and the Venus Charity to empower and educate women.
The Way Forward
The gender pension gap isn’t just a policy issue – it’s a societal challenge. By addressing the systemic barriers women face and empowering them to save, invest, and plan effectively, we can achieve greater financial equality faster than the predicted 20 years.
At FPC, we’re committed to helping individuals and families build brighter financial futures. Together, we can close the gender pension gap and create a more secure retirement for everyone.
Please note that this article is for informational purposes only and does not constitute financial advice.
