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Women in their 50s face looming pension crisis

by July 29, 2024
July 29, 2024
Women in their 50s face looming pension crisis

Women in their 50s are on the verge of a pension crisis due to substantial caring responsibilities and inadequate retirement savings, according to Catherine Foot, director of Phoenix Insights, a think tank associated with the UK’s largest retirement savings firm.

Research from Phoenix Insights indicates that individuals in their 40s and 50s are not saving enough for retirement, leading to a potential “nasty shock” when they reach retirement age. Only one in seven pension savers is currently putting away enough to maintain their living standards post-retirement. This issue is further compounded by the need to support both elderly parents and adult children well into their retirement years.

Catherine Foot predicts a critical turning point around 2035 to 2040, stating, “Future generations of retirees are set for quite a nasty shock when they realise they do not have the funds to support the retirement they anticipated, akin to their parents or even slightly older peers.”

Historically, retirees benefited from defined benefit schemes, where pensions were based on salary. However, from 2035, a larger segment of the population will depend on defined contribution pensions, where retirement funds are solely based on personal savings accrued during their working life.

Adding to the financial strain, older workers, especially women in their 50s, face increasing pressures from caring duties for both younger and older family members. With Britain’s ageing population and rising life expectancy, these women are often responsible for elderly relatives, while high housing costs mean adult children are more likely to remain at home and mortgages may still be outstanding.

Women in this age group are thus required to extend their working lives. The state pension age for women has increased from 60 to 66 over the past 14 years, with another rise to 67 expected between 2026 and 2028.

Foot highlighted the compounded pressures on women in their 50s, saying, “They represent a microcosm of all the issues, from caring responsibilities and housing costs to delayed access to state pensions.”

She called for employers to offer more flexible working conditions, including part-time roles and remote work options, to accommodate older employees facing these unique challenges.

In response to this looming crisis, Chancellor Rachel Reeves has initiated a comprehensive pensions review aimed at enhancing the investment of pension savings and reducing systemic inefficiencies. The Labour Party’s Pension Schemes Bill, detailed in the King’s Speech, proposes to boost each defined contribution pension pot by £11,000.

Foot also advocates for increasing minimum pension contributions from 8% to 12% and expanding auto-enrolment to include younger individuals, low-income workers, those with multiple jobs, and the self-employed.

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Women in their 50s face looming pension crisis

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