In the world of retirement planning, women often face a significant disparity known as the Gender Pensions Gap. Despite strides towards gender equality in recent decades, women continue to lag behind men when it comes to pension savings and financial security in retirement. The most recent data (2018 to 2020) shows a 35% gap in private pension wealth between men and women (Gov.uk).
Understanding the Gender Pensions Gap
There are many factors contributing to this Gender Pensions Gap. According to recent studies, women typically retire with significantly smaller pension pots than their male counterparts. This leaves them more vulnerable to financial insecurity in their later years. Factors leading to this imbalance include:
- Pay gap – It is still the case that women, on average, earn less than men. This leads to lower contributions to workplace pensions over their careers.
- Career breaks and interruptions – Women are more likely to take breaks from paid work for childcare reasons or to care for elderly relatives. This reduces their earning potential and pension accrual over time.
- Part-time work – Women are more likely to be in part-time and/or low-paying jobs. This often offers less access to workplace pensions. It also means employer contributions will be lower.
Due to the factors mentioned above, women tend to have lower lifetime earnings compared to men. This results in smaller pension pots upon retirement.
What is already helping to resolve the issue?
The most notable change to pensions in recent years is the introduction of Automatic Enrolment in workplaces in 2012. Gov.uk shows the Gender Pension Gap reduced to 32% when solely considering those eligible for Automatic Enrolment. Between 2012 and 2021, there was a real terms increase in the amount saved into workplace pensions. The increase was £14.1bn for male employees and £18.8bn for female employees (Gov.uk).
Tips for women to address the Gender Pensions Gap
Despite the many challenges women face that contribute to the gender pension gap, there are proactive steps that they can take to enhance their financial security in retirement:
- Start saving early – The longer you are paying in to a pension scheme, the more funds will be available in retirement. Even if you can only contribute a small amount, this will add up over time.
- Take advantage of workplace contributions – Many employers offer to match your contributions. By contributing the maximum allowable amount, you’ll build your pension pot quicker.
- Explore Self-Employed Pension options – If you’re self-employed you’ll not have access to an Automatic Enrolment scheme. So, consider setting up a private pension to supplement your retirement savings. The contributions made towards this are eligible for tax relief.
- Consult an expert – Financial planning experts, including Willday Wealth Management, are here to help. We’ll work with you to develop a tailored retirement plan, accounting for your unique circumstances and goals.
The Gender Pensions Gap represents a significant challenge for women in the UK. However there are ways to help to overcome it. By taking proactive steps to boost their pension savings, women can work towards closing the gap. They’ll also achieve greater financial security in retirement.
