New VitalityInvest data reveals 60 per cent gender savings gap
VitalityInvest has revealed the latest data from the Your Vitality Future calculator, which finds that the difference in the retirement savings gap between men and women is significant at just over 60 per cent.
The retirement savings gap is defined by Vitality as the difference between a person’s life expectancy at retirement and the number of years’ income that their savings can support.
Furthermore, while the picture is considerably better for men, both genders face the prospect of outliving their retirement savings by several years. To some extent these results may reflect the fact that many people aren’t aware of the value of their workplace savings, but even after factoring this in, the gap between desire and reality is likely to be significant.
VitalityInvest’s analysis centres on the number of years of income that people’s savings will be able to sustain. Both male and female respondents in the study of 5,975 outlined a desire to retire at the average age of 63. According to the data, the average retirement savings gap for men is 9.8 years, whereas that for women is 16 years.
Women face a number of challenges that explain this variance, including the gender pay gap, career breaks while raising a family and the fact that women can, on average, expect to live longer than men.
The implications of the retirement savings gap is that people (women in particular) will have to either work longer, save more or accept a lower standard of living in retirement – or possibly a combination of these compromises.
Mark Dennison of advisers LightBlue UK, says: “The differences between the savings and retirement expectations between men and women are important for advisers to consider in order to be able to better advise clients, especially the younger generation who have just started their pensions journey. There may be many reasons for this, such as access to the right type of financial advice, a lack of understanding of how much they will need in retirement and the amount of disposable income.
“Vitality’s data shows the importance of retirement advice in order to set expectations and build a proper plan as soon as possible, as women especially are saving inadequately for a retirement that is not going to come as soon as they wish.”
Justin Taurog, VitalityInvest Deputy CEO, says: “Our Vitality Future Calculator has shown the pension deficit women are facing. Our data shows that whilst men face a ten-year pension deficit, women face a significantly greater deficit of 16 years. This means that women may, on average, need to work until they are 79 in order to have enough money to fund their retirement. It means people will have to either work longer, dramatically cut back on their spending in retirement, or face the reality of outliving their savings.
“For financial advisers this provides an important call to action for their clients. We believe the key to closing this gap is to create new ways to encourage long-term savings that help advisers engage with all types of investors. We are building savings and retirement plans at VitalityInvest that seek to educate and motivate both men and women to save more for longer while staying healthy into retirement. That’s why we provide rewards for healthy activities and effective savings behaviour, along with nudges to help people down the path to financial security in retirement. We believe this can help to appeal to investors of all ages, genders and personal circumstances across the UK.”