The retirement-funding hack every woman should know

Do you know how long your retirement is going to last? Me neither. But in the absence of a crystal ball, I can only hope for a lengthy and fruitful retirement - and enough money to enjoy it.

According to Fidelity’s Women and Money study¹, more than half (52%) of women doubt they’ll have enough saved to support their needs in retirement. And yet, almost one in eight (12%) women have reduced their pension contributions over the past year - by an average of £173 a month. The main culprit? The cost-of-living crisis.

After all, given the choice between covering expenses this month, and paying into pension savings you won’t be touching for perhaps another decade or two, it’s easy to see which option can seem more attractive when times are tough. You might reason with yourself that the pension pot can wait. Fixing the boiler or replacing the children’s too-small school uniform can’t. (In my experience, if there’s anything that grows faster than the best-performing pension plan, it’s a teenager.)

Fidelity’s study also found that nearly one in eight (12%) of women weren’t sure about the most effective ways to save for retirement.

These findings underscore a broader issue - the gender pensions gap - which disproportionately affects women’s long-term finances. The gap is especially stark among younger adults aged 18-34, where men’s pensions savings are nearly double those of women.

The truth is, it’s often harder to make up for lost time than it is to start paying small amounts into a pension pot early. You’ve no doubt heard the story of the tortoise and the hare (where the over-confident hare takes a nap during a race against the tortoise and is still snoozing when the tortoise plods across the finish line). With pensions too, slow and steady is the best bet. That said, it’s never too late to make a difference and feel more in control of your future finances.

The power of small amounts

Fidelity’s ‘Power of Small Amounts’ calculator lets you see what difference a small increase in your pension contributions could make to your final retirement pot.

The analysis shows that for a 45-year-old woman earning £28,765² (the average salary for women in the UK) increasing pension contributions by as little as 1% could translate to an additional £17,000 in retirement savings. Increasing contributions by 3% could see their savings grow by an extra £51,100, while those who can manage 5% more could secure an additional £85,200.

For a 25-year-old woman earning the same salary, the same small increases could have an even bigger impact. Here, increasing contributions by 1% could lead to an extra £74,000 in retirement. Bumping them up by 3% could lead to £222,100 more, and an additional 5% could accumulate an extra £370,200 by retirement age.

Don’t forget that some employers may match extra contributions, making them go even further.

As Jackie Boylan, Head of Investor Servicing at Fidelity, points out, “Our data shows that it is never too late or too early to make meaningful changes to pension contributions. Even starting later in life, the effect of small, regular increases can significantly enhance financial security in retirement. For younger savers, beginning early and making consistent contributions - no matter how small - can result in a substantial retirement fund.”

Next steps

• To read more about the benefits of starting early and how small amounts can make a big difference, check out our investing principles.
• Learn more about the benefits of investing regularly.

¹ Source: Research was conducted by Opinium Research commissioned by Fidelity International. The survey is based on responses of 2,000 UK adults and was carried out between 14th and 27th May 2024. 

² Source: Calculated using Fidelity International’s Power of Small amounts calculator. Fidelity calculated two hypothetical scenarios, based on a 25-year-old and 45-year-old woman who plan to retire at 68 and both earn £28, 765, based on the most recent ONS employee earnings. This illustration assumes that the individual’s salary will grow by 3.5% each year, and therefore the additional contribution value will increase at this same rate. The projections assume a 5% annual investment growth. The calculation assumes a retirement age of 68 and does not take inflation into account. The tool’s projections do not consider the impact of any investment charges or fees.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.