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Young women opt-out of workplace pensions

When workplace pensions were introduced, there was widespread concern that a high proportion of employees would opt-out, and therefore miss out on contributions made by their employers.

This fear does not appear to have materialised for most savers, with one exception.

New research by insurer Royal London has found that women in their 20s and 30s face significant challenges in saving for retirement, and young women are putting their future retirement security at risk by opting out of their workplace pension.

Analysis of the mutual insurer’s auto-enrolment pension book shows a worrying spike in opt-outs among younger women. 10.5% of women aged 22-29 are opting out of their workplace pension in contrast to 8.1% of men in the same age group.

The data highlights a spike in women opting out of pension saving in their 20s and 30s, most likely as they face other commitments like childcare or saving for a house.

While this may seem like a good idea for them in the short term to fund other priorities, opting out of a pension will only lead to more significant financial problems in the future.

Getting back into the habit of saving for later life is difficult for women if they have missed significant contributions. Hence, we need to do everything we can to encourage these women to stay saving for the long term.

Helen Morrissey, a pension specialist at Royal London

While the difference between male and female opt-outs is stark in the 20-29 age group, it evens out from the age of 30. After the age of 60, the picture changes again with significantly more men than women opting out.

Many women leave the workforce to look after children and often only return to work on a part-time basis. Added to this is managing the high cost of childcare, which means many women don’t feel they can afford to save for retirement.