Women are less financially confident – could it be impacting their retirement?

• Women are less likely to have engaged with financial products that will benefit them in retirement – such as savings, investments and private pensions
• A Legal & General Retail survey of 22 – 32 year olds in the UK
• has found that the gender pensions gap will remain significant for this younger age group for decades to come unless interventions are made
• To help tackle the issue of financial literacy, Legal & General’s new podcast A Little Bit Richer aims to give young people the confidence to manage their money

Women are 33% more likely than men to say they do not understand how their pension works – indicating a lack of financial confidence, according to by Legal & General Retail’s Lost Decade research.

This lack of confidence could be why women are less likely to have engaged with key financial products which will drive better outcomes in the future. For example, women are 38% less likely than men to have a stocks and shares ISA, and 32% less likely to have a private pension.

Analysis by Legal & General Retail¹ has found that this lack of engagement, along with other factors such as the gender pay gap, could see young women in the UK (aged 22 to 32) with the equivalent of just £12,873 per year by the time they reach retirement in the 2060s. By comparison, young men are on track to have almost a third more in their retirement pockets – receiving £19,803 in income per year on average.

Young women are forecast to have an average of £644,701 in their workplace pension pot (equivalent to £195,636 adjusted for inflation) at the point where they reach the state pension age, based on current savings levels. This equates to an income of approximately £42,421 a year in retirement. Despite the fact this may sound like a generous income today, adjusted for inflation, by the 2060s this will be the equivalent of just £12,873.

(Based on Legal & General analysis)

Contributing to the gender pensions gap, the analysis also revealed a significant gender pay gap. By the age of 27, women are already earning £10,000 less than men of the same age. Furthermore, the research does not take into account other factors that could impact women’s pension savings, such as being less likely to hold senior leadership positions and being more likely to take career breaks for childcare, leading to an even wider pensions gap in reality.

To help women build their confidence when it comes to their finances, Legal & General have launched new podcast A Little Bit Richer. Hosted by financial influencer Kia Commodore, the podcast will cover everything from making sense of your payslip, to mortgages and pensions, to financial wellbeing and mental health. This can be downloaded from Legal & Generals’ official site or through your preferred podcast listening app.

References

¹Analysis based on the following research and assumptions:

• Opinium Research conducted 2,000 online interviews of people aged 22-32 between the 15^th and 29^th August 2023
• CPI = 3%
• Salary premium = 1%
• Salary increase = 4% p.a. (this assumes that salary increases on annual basis up to retirement at 68)
• Median male salary at age 27 = 35,000
• Median female salary at age 27 = 25,000
• Start saving into a workplace pension at age 22, retiring at age 68
• Investment return on pension pot, assuming broad 60/40 asset split, (7% p.a., 4% real)
• Qualifying earnings – Currently (£6,240 to £50,270), Historical years (actual LEL and UEL), Future years (increased annually by CPI assumption)
• Income based on current Legal & General annuity - fixed rate, single person annuity at age 68, with a 10-year GMPP

Women are 33% more likely than men to say they do not understand how their pension works

• 320 (men) – 425 (women) = 105. 105 / 320 = 32.8125% (33%)

Women are 38% less likely than men to have a stocks and shares ISA

• 324 (men) – 201 (women) = 123. 123 / 324 = 37.962962962963% (38%)

 Women are 32% less likely to have a private pension

• 324 (men) – 221 (women) = 103. 103 / 324 = 31.79012345679% (32%)