Women more likely to retire on lower incomes than men

Mhari Aurora
·4 min read
Women's retirement funds are smaller than men's due to lower earnings.
Women retire on lower incomes than men due to lower earnings. Photo: PA

Low levels of pension knowledge among women impact their financial planning and retirement income, according to a survey.

Pension knowledge is relatively low despite encouraging increases among young people, and research carried out by Opinium Hargreaves Lansdown suggests women in particular are likely to have less to live on as they reach retirement than their male counterparts.

Hargreaves Lansdown, one of UK’s largest stock brokers, said: “Part of this comes down to how much they have in pension savings, as a result of pay that’s lower on average and careers that are more likely to involve breaks.

“We know lower pension savings mean lower engagement. We also know that within couples, men are more likely to take responsibility for pension planning, and women are more likely to manage the day to day cash.

“Unfortunately, this means women are far more likely to retire on much lower incomes than men.”

READ MORE: Retirees looking to buy an annuity income may be disappointed, research finds

As women earn less on average than men in the UK these figures are perhaps not surprising, but women’s lack of financial stability is a global trend.

According to the UN, women are disproportionately more in the informal economy, are more likely to be burdened with unpaid care, and make up the majority of single-parent households.

The data suggests less than one third of women know how much their pensions are worth compared with almost half of men, and three quarters of women do not have a clear idea of what income they need to retire.

Pension knowledge among men and women. Source: Hargreaves Lansdown
Pension knowledge among men and women. Source: Hargreaves Lansdown

Although people’s general confidence in whether they will be able to afford retirement is increasing, this growth is far slower for women who are almost half as likely as men to be confident they can afford to retire.

The research results come from a representative sample of 2,000 people in October 2018, 2019 and 2020 and despite a 15% increase in confidence across every age category, among women this increase was almost half that, up by just 8%.

Pension knowledge among all age groups. Source: Hargreaves Lansdown
Pension knowledge among all age groups. Source: Hargreaves Lansdown

According to the Office for National Statistics the gender pay gap among all employees was 15.5% in 2020 and “compared with lower-paid employees, higher earners experienced a much larger difference in hourly pay between the sexes.”

READ MORE: DAVOS 2021: 'Multi-stakeholder approach' needed to combat coronavirus-induced 'recession for women and girls'

Key steps to planning your pension

To many, pension planning might seem like a pipe dream, but preparing for retirement can pay off massively in the long run.

Setting goals for the kind of retirement you would like to have and getting the ball rolling on achieving those goals may be time-consuming, but it could make all the difference when the time comes.

Sarah Coles, personal finance analyst for Hargreaves Lansdown, said: “Paying for our retirement is an expensive business, and now employers and the state are keen to play a smaller role, the heavy lifting is down to us.

“Unfortunately, pensions knowledge is still worryingly low. However, over the past three years we’ve seen enormous improvements. There’s still a long way to go, so we all need to get to grips with our pensions.”

The first step is to do your research.

Look up pension providers and what they have to offer, speak to your employer about their pension scheme and if there are different options available to you, and use platforms such as the Money and Pensions Service or Pension Wise.

After you know more about your options you can then use an online pension calculator to see how far you are from achieving your goal and the steps you need to take to get the retirement you want.

You will need to decide how you want your pension to be invested, depending on what’s important to you and how risk averse you are, and a chat with a financial adviser could be a useful way to get to grips with planning for the future.

WATCH: Should I pay off debt or save money during the coronavirus pandemic?