‘Long-term savings gap’ means many women face poverty in retirement

‘Long-term savings gap’ means many women face poverty in retirement Image source: Getty Images

New data reveals many women are heading for poverty in retirement due to a reluctance to invest. Strikingly, it’s also reported that women typically have just half the retirement savings that men have.

So, how can women address this gender savings gap? And if you’re worried about retirement, how can you boost your post-work prospects? Let’s take a look.

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What does the data reveal about the retirement prospects for women?

According to InvestEngine, just a quarter of its portfolios are held by women. The investing platform says that while it’s working to improve the number of women investors, ‘more change’ is needed across the sector.

Andrey Dobrynin, managing director of InvestEngine, explains how women often suffer financially for a number of reasons, which can impact their ability to save for retirement. He explains: “Lower average earnings than men, more part-time working, and having time out of paid work caring for children or older relatives all mean women are likely to save less for retirement.

“Even if women pay the same contribution rate as men to a workplace pension – 5% for example – if they’re on a lower salary, then their 5% is worth less in pounds terms.”

Dobrynin also highlights how women simply saving as much as men for retirement may not be enough. That’s because the average life expectancy for women in the UK is 83.1 years. For men, it’s 79.3 years.

He explains: “Equality isn’t enough – women don’t just need to catch up with men on retirement savings, they actually need more in their pension pots because they’re likely to have longer retirements than men. Women’s savings have to last longer: some industry studies have shown that women need to accumulate up to 7% more in savings than men, to have the same income through retirement.”

How can women improve their retirement prospects?

Regardless of your gender, there are several steps you can take to boost your retirement prospects. The first step is to ensure you are on track to make the required 35 years of National Insurance contributions to qualify for the full State Pension. If you aren’t, you may wish to make voluntary contributions.

The next step is to focus on your private pension. If you’re on an auto-enrolment scheme, you should look to increase your contribution to at least the maximum level, where your employer matches what you put in. Your employer must match contributions up to at least 3%, while the overall contribution (including employer contributions) must be at least 8% of your salary.

If you max out your contributions into a company pension, you may wish to explore opening a SIPP. This gives you another way of boosting your retirement pot.

Finally, you may also wish to save more from your monthly post-tax salary and stash it somewhere it can grow long term. This, it appears, is where many women are falling short, especially women opting for savings accounts as opposed to investing their wealth.

InvestEngine’s Andrey Dobrynin explains this in more detail: “For women wanting to boost their long-term savings to catch up with men, the benefit of stock market investing over keeping cash on deposit can be stark – especially given rising inflation and the pitiful bank rates available today.”

How can you start investing?

Saving more may be easier said than done, especially for those struggling with the rising cost of living. However, if you are able to put away cash each month, then you may wish to start investing.

That’s because, in the long run, investing in the stock market typically delivers higher returns than normal savings accounts. It isn’t difficult to see why this is right now given the poor savings rates currently on offer. However, there are no guarantees that this trend will continue in future.

If you do plan to invest, you may wish to explore opening an investing account within a stocks and shares ISA. Do this and you can invest knowing that your returns will be tax free. Just keep in mind the annual £20,000 ISA allowance limit. Interactive Investor’s Stocks and Shares ISA is currently the Motley Fool’s top pick for beginner investors.

Alternatively, you may wish to open a non-ISA account. See our top-rated share dealing accounts for a number of different options. 

If investing is new to you, then it’s a good idea to get to grips with the investing basics.

Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, nor does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

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