Women need to work for almost two additional decades to end up with the same size pension pot as men, new research reveals.
The pension gender gap currently sits at just over 33%, according to Now: Pensions. It has been calculated that women have average pension savings of £69,000 by the time they reach the age of 65, compared to £205,000 for men.
To close this gap, women would need to work full-time for an extra 18 years. In practical terms, this would mean they either need to start working at the age of four in full-time employment or continue working till they’re 83 to build up the same level of savings as men.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.
Why is the gender pension gap so big?
The sad reality is that the gender pension gap is nothing new. This new research highlights that while the gender pension gap appeared to narrow between 2019 and 2020 falling from 32.58% to 28.29%, it rose again in 2021 to 33.5%.
Some might assume that the single biggest contributor to the gender pension gap is the gender pay gap, but the bigger picture is a lot more nuanced. There are a number of factors that have an impact, but one of the most significant is that women are much more likely to take on unpaid caring roles such as raising children or caring for older parents. The ripple effect of this is that women tend to work in part-time roles to provide them with greater flexibility.
House of Commons Library research shows that 38% of women work part-time compared to 13% of men, and as a result receive a lower income. This means they often don’t meet the pension auto-enrolment thresholds and consequently have much lower pension savings. However, being on a low salary doesn’t have to be a barrier to joining your company pension. Find out more in our guide Can I join my workplace pension scheme if I’m on a low salary? You can learn more about the gender pension gap in our article Women and the gender pension gap.
What’s being done to narrow the gender pension gap?
A number of charities and organisations are petitioning the government to introduce greater protections for women in recognition of the important societal contribution they make in these unpaid roles. As Anna Whitehouse, Author and founder of Flex Appeal, said: “If women did not work flexibly and take on caring responsibilities, the economy would crumble.”
Two of the key things they want the government to do are to lower the auto-enrolment threshold and offer state-backed auto-enrolment credit that could be claimed during career breaks, much like National Insurance contributions.
Chris Noon, Partner at Hymans Robertson said: “It’s becoming increasingly clear that one of the primary shortcomings with the UK pensions framework is in the retirement outcomes for women, compared to those enjoyed by men.
“Evidence from the Pensions Policy Institute shows that this is largely due to the significant career breaks that many women take, as well as the higher prevalence of women working part-time. Introducing State auto-enrolment credits, alongside other measures to extend auto-enrolment, would make a significant difference in addressing the inequality.”
“Figures published in February suggest that reducing the auto-enrolment threshold from £10k to £5k would bring over 800,000 individuals into the scope of auto-enrolment. Of these, around three-quarters of them (i.e. over 600,000 individuals) would be women.”
What can you do to boost your pension?
While it’s great that more conversations are being had about the gender pension gap, if you have a lower pension pot and are nearing retirement, it might seem like too little too late, but there are still things you may be able to do to boost your savings.
If you are a few years away from retirement, make sure you’re enrolled in your workplace pension, pay as much as you can into your pension, and make sure you review your pension pot regularly.
Remember that it’s never too late to start savings, so you have no retirement savings, our article Saving into a pension for the first time can provide you with some information on how to start building your pension pot.
If you are self-employed, your pension options can be confusing. Our article Self-employed pension options explained provides guidance on how you can save for the retirement you want if you work for yourself.
If you’re in a relationship and you are not working or are taking a career break, your partner may be able to contribute to your private pension pot. Our article, Can my husband or wife pay into my pension – or can I pay into theirs? explains how to do this.
If you’re not sure whether you have enough saved for your pension, or you’re worried your pension isn’t invested in funds that are appropriate for you based on your approach to risk, you might want to speak to an independent financial adviser who can recommend the best course of action based on your individual circumstances.
You can find a local financial advisor on VouchedFor* or Unbiased*, or for more information, check out our guides on How to find the right financial advisor for you or How to get advice on your pension.
If you’re considering seeking professional financial advice on the options available to you, we’ve partnered with nationwide independent advice firm Fidelius to offer Rest Less members a free initial consultation with a qualified financial advisor. There’s no obligation, however if the adviser feels you’d benefit from paid financial advice, they’ll talk you through how that works and the charges involved.
Fidelius are rated 4.7 out of 5 from over 1,500 reviews on VouchedFor, the review site for financial advisors.