How the gender wealth gap could affect women’s retirement

Many women face significant financial challenges due to age-old systemic inequalities. One of the most important is the gender wealth gap, which is the tangible difference in how much wealth men accumulate on average, compared to women.

Though there are many reasons this happens, the gender wealth gap can have a profound effect on a woman’s ability to achieve a comfortable and secure retirement. This could leave women more susceptible to financial strain in their later years.

For example, NOW: Pensions states that women typically retire with pension savings of £69,000. For men, this figure rises to £205,000. More than that, if the average woman wanted to retire with the same amount of money as the average man, she would need to start saving at the age of three.

With International Women’s Day on the horizon, it’s a timely opportunity to explore the causes behind this gender wealth gap and provide a few practical strategies to potentially overcome it.

If this sounds like something you may be dealing with, keep reading to learn more about the gender wealth gap and how to take charge of your financial wellbeing.

The gender wealth gap and the gender pay gap are different issues but may lead to similar outcomes

The gender wealth gap represents the difference in total wealth accumulated between men and women. It’s a broader measure of financial wellbeing than the gender pay gap, as it considers not just a person’s current income, but their combined assets. This could include savings, investments, property, and pensions.

While the gender pay gap focuses on the difference in earnings, the wealth gap shows how these inequalities can accumulate into a huge financial disparity over a lifetime. The distinction is also important because, even if a man and a woman earn similar salaries at some point in their careers, other factors can prevent women from accumulating the same level of wealth overall.

As an example of the difference, the Joseph Rowntree Foundation (JRF) reports that, on average, men have £92,762 more wealth than women. For men, the primary source of their wealth lies in private pensions.

That being said, pensions are often paid through salaries, so the amount you earn will normally impact the amount you can put into your pension. According to the Office for National Statistics (ONS), in April 2024, women earned 7% less on average than men for full-time work. While the gap has closed by 0.5% since April 2023, a disparity still exists.

It’s important to understand that the wealth gap is not simply a reflection of lower earnings. It’s a complex issue rooted in a variety of factors.

Women may experience a wider wealth gap due to career choices, home life, and financial education

Women are often concentrated in lower-paying industries and occupations, which can limit their earning potential over their careers. This could directly affect their ability to accumulate wealth. For instance, NOW: Pensions states that the average annual income for a woman is £24,800 while men earn £33,000 on average.

Women are also more likely to take career breaks for caregiving responsibilities, such as raising children or caring for elderly parents. These breaks can disrupt career progression, reduce lifetime earnings, and potentially affect retirement savings.

Remember, even short periods out of the workforce can have long-term effects. In fact, NOW: Pensions reports that career gaps can amount to £39,000 in lost pension savings.

Finally, research suggests that differences in risk tolerance and access to financial information can affect how women invest compared to men. According to Female Invest, only 29% of women report trading stocks and shares online, compared to 47% of men. Moreover, according to Female Invest, only 1 in 10 women globally believed they fully understood investing.

These potential differences can affect long-term returns. In this area, having access to quality financial information can make a significant difference.

Actionable financial strategies could help close the pension gap and let women thrive in retirement

While the gender wealth gap does understandably present a few challenges, there are some steps women can take to improve their financial security and prepare for retirement.

Conduct a thorough financial assessment

Start by taking stock of your current financial picture, as this can help you create a solid foundation to build on. The more you know now, the better prepared you could be for the future. This financial assessment could include:

• Documenting all sources of income
• Tracking your monthly expenses
• Accounting for all debts, including mortgages, loans, and credit card balances
• Listing all your assets, including savings, investments, property, and other valuables.

Since you’re building your foundation, you may want to take some time to consider how you could improve your financial situation as well. Do you have ways to boost your income? Or perhaps managing your debt first could put you in a better position to save money?

Finally, compare this picture to what your needs may be in retirement. From here, you can start weighing up whether you will have enough to meet your retirement goals.

Make sure you’re on track to meet your retirement goals

To ensure you’re on track for a comfortable retirement, consider when you’d like to retire and the type of lifestyle you envision for yourself.

Factors that contribute to an affordable retirement include:

• Your desired retirement age
• Your estimated living expenses
• Where you’d like to live
• What your preferred activities and overall lifestyle could cost.

Though each person’s situation is unique, Retirement Living Standards (RLS) has outlined the requirements for various levels of retirement comfort.

For a moderate lifestyle, you will need at least £31,300 each year as a single person, or £43,100 for a couple. This would allow you to take a foreign holiday once a year and eat out a few times each month, for instance.

For a comfortable lifestyle, you’d need a minimum of £43,100 (or £59,000 for a couple). This would give you the option to take multiple holidays a year, get regular beauty treatments, and be more spontaneous with your money.

Based on your desired lifestyle and the RLS guidelines, it may estimate how much annual income you’ll need in retirement. Be sure to consider factors such as inflation, whether you’re married or single, and any potential changes to your living expenses that might occur once you stop working.

You can work with a Financial Planner to work out an accurate picture of how your retirement might look.

Seek professional financial advice

Consulting with a Financial Planner could be invaluable for your retirement planning, as they can offer personalised guidance tailored to your specific circumstances.

A Financial Planner can help you develop a comprehensive plan that considers all aspects of your financial situation. They can also offer ongoing support and advice, helping you stay on track with your retirement savings goals and making adjustments as needed.

While the gender wealth gap may present a significant obstacle to a woman’s financial security, there are plenty of ways to minimise its effects. By taking proactive steps, investing wisely, and seeking professional advice, women can overcome this hurdle and improve their retirement outlook.

Get in touch

If you’re an existing client, get in touch with your Planner for a review and let’s work together to see if we can improve your financial situation.

If you’re new and looking for unbiased advice and a tailored plan that suits your financial goals, email us at enquiries@pen-life.co.uk, or call 01904 661140.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.