○ 35% of women aged 22-29 don’t know how much is needed for retirement, while nearly two in three are concerned about running out of money

○ 23% of the same group would be ‘frustrated’ if they couldn’t retire by 60

○ This is despite one in ten (10%) opting out of saving into their employer’s pension scheme, preferring to use savings elsewhere

Almost a quarter (23%) of women in their 20s (aged 22-29 years old) would be frustrated if they couldn’t retire by the age of 60, according to research from Scottish Widows. Despite that 10% of this group have opted out of their employer’s pension scheme, further risking their chances of retiring when they plan to.

In addition, 35% don’t know how much income they would need for a comfortable retirement and nearly two in three (62%) young women are concerned about completely running out of money in retirement.

Despite the clear uncertainty about their futures, Scottish Widows highlights the fact that younger women are missing out on making a significant early difference. While 19% of men start paying into their pension by age 22, just 14% of women do this, signalling a clear opportunity for more young women to start saving into pension from an early age.

Of those that did opt out of being automatically enrolled into their employer’s pension scheme, 29% said it was because they couldn’t afford to keep up regular pension contributions, and 14% said they would prefer to spend the money now. In fact, women are saving less than men toward an employer pension at nearly every point in their lives. Yet acting early is key, given the pension gap also grows with age, with the difference between pension values of men and women being 10% at age 25, and 50% at age of 50(1).

Jackie Leiper, Managing Director, Scottish Widows, said: “Our research shows a significant gap between the expectations of women, and the action taken to meet those expectations. Alarmingly, 10% have opted out of their workplace pension, meaning they are missing out on compound interest gains and crucially, the ‘free money’ that comes with employer pension contributions. Opting out of your employer’s pension scheme is tantamount to taking a pay cut.

“The hard truth is, by the time these women reach the end of their working lives, they may face a much harder retirement compared to those who have consistently contributed. Compounded further by often having to take enforced career breaks. The good news for anyone in their twenties though is that time is on their side.”

Fortunately for younger women, there are steps which – if taken during their careers in their 20s – can robustly improve retirement outcomes. By starting early on and maximising available employer contributions they can make the most of compound gains.

For example, a woman aged 20, contributing £278(*) a month, for a total contribution of £153k over the course of her career, can harness the power of compound gains and end up with a retirement pot of £250k in today’s money. However, starting off later, to achieve the same goal, requires staggeringly different inputs. Someone who contributes £1,107 a month in today’s money from the age of 50 will contribute a whopping £212k of their own money, with a snowball effect of only £38k in today’s money to accumulate the same total pot of £250k. That equates to a difference of £59k in today’s money over the course of a career in compound gains.

Jackie Leiper added: “Urgent action is also required to help tackle the gender pension gap. Education on how to support women with the steps to engage in their pension early is a must, but when combined with policy changes it will play a crucial role in helping all women actively take control of their pensions and start thinking about future savings decisions.”

Ellie Austin-Williams, @thisgirltalksmoney, said: “It’s scary to see the contrast between retirement expectations and the reality that many women in their 20s will face, but it isn’t surprising. Speaking to my community online, it’s clear that young women want to invest in their financial future but the cost of living crisis has made it more difficult than ever to prioritise their pensions.

“The challenge is that paying into a pension regularly from the start of your career is essential, especially given the boost provided by a workplace pension. Plus, it’s crucial to closing the gender pension gap which can grow to £100k(2) . Through raising awareness of the importance of a pension and the impact of compounding over time on your pension pot, the hope is that more young women can take control of their future savings today.”

Notes to Editors

(1) Pension gap data, Scottish Widows

(2) Women in Retirement Report 2023, Scottish Widows

(*)All figures mentioned in this paragraph refer to today’s money

Methodology

The research was conducted online by YouGov on 5,072 nationally representative respondents in the UK between 21/03/2023 – 05/04/2023. A further survey of 1,352 ethnic minorities in the UK took place between 21/03/2023 – 06/04/2023.

About Scottish Widows

Founded in 1815, Scottish Widows is part of Lloyds Banking Group, the UK’s largest digital bank and financial services group. With nearly £170bn assets under administration and six million customers, Scottish Widows’ award‐winning product range includes workplace and individual pensions, annuities, life cover, critical illness, income protection as well as savings and investment products. Customers can access our products and services through independent financial advisers, directly, and through all Lloyds Bank, Bank of Scotland and Halifax branches.

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