The introduction of “family pension pots” could help to close the pensions gender gap, a report has suggested, with an estimated two in five women and one in three men potentially heading towards poverty in retirement.
More should be done to empower women to invest and consider the options to grow their retirement wealth, according to Scottish Widows, which made the findings.
A shift in approach towards joint financial planning is also needed, so that women do not lose out in the event of a divorce or when retirement annuities – which give the annuity holder an income for the remainder of their life – are purchased, the report argued.
The report said: “Men tend to have bigger pension pots, to be older and to die at an earlier age than their spouses, which means many women lose a significant source of their retirement income when their partner dies.”
It suggested that family pension pots could help to overcome some pensions gender inequalities.
Without drastic action, the gender gap will take another 20 years to close, and there is a very real risk that we won’t see pension parity for many generations to come
Jackie Leiper, Scottish Widows
Such pots could work by a couple selecting their pension provider and workplace pension contributions collectively going into the same pot.
The report said: “If the couple were to get divorced the plan would be split between the two automatically.”
It added that if the couple bought a retirement annuity: “This could become more consistent with an annuity provided for both rather than the typical status quo that sees annuities purchased for only one partner, which is then lost on their death.”
Jackie Leiper, managing director, Scottish Widows, said in the report: “Without further action, the gender pensions gap will never close.”
The report made a “national retirement forecast” to indicate the retirement lifestyles and retirement income (after paying tax and housing costs) that people are on track for, based on their current behaviour, across private pensions, other long-term savings, inheritance and the state pension.
Researchers estimated that 42% of women risk facing poverty in retirement, compared with 35% of men.
The forecast took into account a set of retirement living standards defined by the Pensions and Lifetime Savings Association (PLSA), as well as expenses such as housing costs for those who expect to rent or continue to pay off a mortgage in retirement.
Those deemed by Scottish Widows to be at risk of poverty in retirement could potentially have a retirement lifestyle that falls below the minimum standards as defined by the PLSA.
The Women and Retirement Report from Scottish Widows has been tracking women’s retirement savings for two decades.
Only 38% of women invest outside pensions, in assets such as shares and property, compared with 55% of men, researchers found.
Among young women aged 18 to 24, only 34% invest, compared with 64% of men in the same age group.
Scottish Widows called for a Lifetime Savings Commission to be set up, which would consider the challenges of retirement savings, the role of housing and the need to build financial resilience.
Ms Leiper added: “Progress has been made on the gender pension gap over the last two decades thanks to game-changing interventions like auto-enrolment and improving equality on women’s pay and role in society.
“But we are still a long way from where we need to be. Without drastic action, the gender gap will take another 20 years to close, and there is a very real risk that we won’t see pension parity for many generations to come.”
Various surveys were carried out for the report, including a YouGov survey among more than 5,100 people across the UK in March and April 2024.
While society has progressed, pension structures have remained frozen in time and women continue to face the brunt of this systemic misrepresentation
Paul Leandro, Barnett Waddingham
Paul Leandro, a partner at consultancy Barnett Waddingham, said: “This research underscores the pressing need for modernisation.
“While society has progressed, pension structures have remained frozen in time and women continue to face the brunt of this systemic misrepresentation.
“If our pension system is to work for everyone, we must actively tailor it to the realities of everyone’s individual lives.
“There is no universal or simple fix to this problem. By simply telling women to contribute more, we are overlooking the inherent fiscal, behavioural and societal issues that are contributing to the continuation of the gender pension gap.
“We must work not only to encourage better saving habits, but also make core changes to the infrastructure of our pensions system.”
A Government spokesperson said: “We are committed to closing the gender pension gap and building on the success of automatic enrolment, which has brought millions of women into pension saving for the first time.
“Our landmark pensions review will explore options to ensure under-pensioned groups have the dignity and security they deserve in retirement, and more than 15 million pension savers could benefit from our forthcoming Pension Schemes Bill – with the potential for an average earner to have £11,000 more in their defined contribution pot by retirement when saving over a career.
“We will also continue to track the collective efforts of government, industry and employers to tackle this issue through our gender pension gap reporting.”
