Scottish Investment Trust : Why are women saving less for retirement than men?

Here at the Scottish, we often write about how important it is to start saving early in life. The power of compounding dividends and the ability to ride out stockmarket volatility over the long-term are just two reasons why an early start can really make a difference.

Despite most people's best intention, the problem with planning for retirement is that life can get in the way. Those who've been furloughed, for example, are much more likely to be focused on paying their mortgage and maintaining their standard of living, so it's easy for pension planning to fall off the radar.

There may be other factors at play - especially if children are part of the equation. The high cost of UK childcare means that many families decide that it makes economic sense for one parent, most commonly the woman, to take on the childcare role. A report released by the Institute for Fiscal Studies found that employment rates for women fell from 90% to 75% after they became mothers. There was also a big drop in hours worked, even among women who had been the higher earning partner before having children. The report found a 26% reduction in the working hours of higher paid women, but no reduction in the paid hours of fathers - even when they earned less than their female partners before their child was born.

These figures only make sense when we consider societal attitudes towards men and women's roles. A 2019 report by Promundo using data from 23 countries found that a significant proportion of men and women agreed that changing nappies, bathing and feeding children should be the mother's responsibility.

When it comes to saving, all of this has consequences. The 2020 Women and Retirement report from Scottish Widows found that there was a £100,000 gap in retirement savings between men and women on a median wage, over a 44-year working life.

Coming full circle: planning early

This is the most obvious structural inequality facing female savers, which makes the need for early saving even more pressing for women. Pension-dedicated wrappers such as SIPPs are one of the most tax-efficient ways to secure your future, as HMRC 'tops up' the amount invested: for every £80 contributed, a basic rate tax payer will see £100 toward retirement. As March was Women's History Month, we should take note of the women who learned the lesson of pension poverty. We can't change the past, but we can look for a better future.

Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations.

Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this article should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.