Research from Scottish Widows shows that almost 23% of women between 22 and 29 would feel frustrated if they were unable to retire by age 60. The research highlights significant gaps in understanding retirement planning, with 35% of young women unsure of how much they’ll need for a comfortable retirement, while two-thirds (62%) are concerned about running out of money entirely during their retirement years.
Financial Uncertainty Among Young Women
Despite the growing concerns about financial security later in life, 10% of women in this age group have opted out of their employer’s pension schemes, further jeopardising their ability to retire as planned. Alarmingly, this decision puts these young women at a greater risk of not achieving their retirement goals, as they miss out on employer contributions and the benefits of compound interest over time.
Furthermore, the research reveals that while 19% of young men begin contributing to their pensions by the age of 22, only 14% of women do the same. This disparity signals a missed opportunity for young women to take advantage of the long-term benefits of early pension contributions.
Why Are Young Women Opting Out?
Among the women who have chosen to opt out of their workplace pension schemes, nearly 29% said they couldn’t afford to make regular contributions, and 14% admitted they would prefer to spend the money now. These decisions contribute to the pension gap between men and women, which stands at 10% at age 25 and widens to 50% by age 50.
Scottish Widows Calls for Action
Jackie Leiper, Managing Director at Scottish Widows, commented on the findings, stating: “There is a significant gap between young women’s retirement expectations and the steps being taken to achieve those goals. By opting out of employer pensions, they are essentially giving up ‘free money’ in the form of employer contributions and compound interest.”
She went on to say: “As these women near the end of their careers, they could encounter a far more challenging retirement compared to those who consistently contributed to their pensions.” This is compounded by the fact that women often have career breaks, further widening the pension gap.”
The Importance of Early Contributions
The report emphasises the importance of starting pension contributions early. A 20-year-old woman contributing £278 per month throughout her career can potentially build a retirement pot worth £250,000 in today’s money. However, if she waits until age 50 to start, she would need to contribute £1,107 per month to achieve the same result, requiring significantly more of her own money with far fewer compound gains.
Leiper emphasised: “There is an urgent need to address the gender pension gap.” This includes both educating women about the importance of early pension engagement and enacting policy changes that support women in making informed financial decisions.”
A Financial Expert’s View
Ellie Austin-Williams, founder of @thisgirltalksmoney, echoed the findings: “It’s daunting to see the gap between what women expect for their retirement and the reality they might face. Speaking to young women, I know they want to invest in their futures, but the current cost-of-living crisis makes it hard to prioritise their pensions.”
She remarked: “Consistent pension contributions, particularly when bolstered by employer contributions, play a key role in bridging the gender pension gap.” Raising awareness about the benefits of early contributions and compound growth is crucial for ensuring young women are better prepared for retirement.”
