More than 5.5million workers have cut or completely stopped their pension contributions due to the impact of Covid-19 and lockdown, a new study will reveal this week.
The decline in pension saving will raise fears that millions of workers could be forced to delay retirement as they struggle to put away adequate savings for later life.
Scottish Widows’ 16th annual Women and Retirement report also warns that the gender savings gap could widen due to the pandemic, after years of progress.
Decline: Women are more likely to work in sectors hardest hit by the impact of coronavirus
Women are more likely to work in sectors hardest hit by the impact of Covid, such as hospitality and retail, where pay is typically lower and part-time working more common. They are a third more likely to work in a sector shut down during lockdowns, a study from the Institute for Fiscal Studies estimates.
Women’s pension planning had been improving, reaching a record high in the year to April, the annual Scottish Widows report found. As many as 59 per cent of women are saving adequately, compared to 60 per cent of men.
Scottish Widows defines ‘adequate savings’ as 12 per cent of salary. However, for many people this will not be nearly enough for a comfortable retirement.
Older women have driven the improvement in adequate savings. As many as 64 per cent of women aged between 50 and 59 are saving adequately, compared with 46 per cent of those aged between 22 and 29. The amount being saved varies significantly between men and women. A woman on an average salary saving adequately is saving just £2,300 a year compared to her male counterpart’s £3,600.
The annual difference means that women are likely to retire with around £100,000 less in their pension pots than men.
Workers may have to work for longer to make up pension shortfalls, according to the report.
However, a second report just published found that many older workers may be forced to accelerate their retirement plans due to health issues and redundancy brought on by Covid-19. Just 51 per cent of UK adults plan to work beyond state pension age, down from 71 per cent a year ago, according to the report from insurer Canada Life.
To help boost retirement incomes, Scottish Widows recommends tweaks to auto-enrolment including rolling it out to the self-employed; dropping the minimum age from 22 to 18 to give people more time to save; and maintaining employer contributions even when employees opt out.
Jackie Leiper, workplace savings director at Scottish Widows, says: ‘The livelihoods of millions of people are at stake as the Government seeks to navigate a way out of the current crisis. But the evidence in this report suggests this threat is even greater for many groups of women. Urgent action is going to be required to limit the damage on their livelihood and longer-term prospects.’