Combatting the Gender Pension Gap

Something that is often overlooked until too late in life is the ￡136,000 gender pension gap. This is the average difference between women’s retirement pots and men’s, when they reach retirement age. It’s such a silent problem, that you’ve probably never heard of it.?

What is the Gender Pension Gap?

The gender pension gap is exactly what it says on the tin. It is the gap between women's and men’s pension pots and the income they receive during retirement.?

The gender pay gap was declining slowly over time. However, last year it ws reported that the gender pension gap was only ￡123,000, which would mean a ￡13,000 increase in a year, among both full-time employees and all employees. Each #InternationalWomensDay, LinkedIn is flooded with posts from employers boasting about the reduction in their gender pay gap. And, whilst we are making steps and strides towards gender equality, there are still disparities between the genders.

Some shocking but important statistics on this topic include:?

1. The gender pension gap today stands at 35% (this is the average difference between private pensions for men and women).

2. On average, women contribute a higher proportion of their pay to their pension than men.

3. Statistically, women need to work an extra 19 years to match male pension pots.

4. 10.4mn women are ineligible for auto-enrolment (that’s 1 in 6 women).

5. On average, women live four years longer than men, placing an even greater onus on retirement savings.

Why Does the Gender Pension Gap Exist?

The gender pension gap is a systemic issue. No one company, body or person set out to create a difference in women's and men’s pension pots, but many other factors snowball into the significant gender pension gap.?

There are many factors that play a part in the gender pension gap, whether they are structural and systematic or more socioeconomic and cultural.?

Wage

Despite advancements in pay equity, women are still earning less than men on average. Lower wages translate to smaller contributions to pension funds, ultimately leading to reduced retirement savings.

Time Off

Women are more likely to take career breaks for caregiving responsibilities, including child-rearing and caring for elderly relatives. These breaks often result in interrupted employment, leading to fewer years of pension contributions and consequently, reduced pension payouts.

Part-time Work and Temporary Employment

A significant proportion of women are employed part-time or in temporary positions, which often lack access to pension schemes or offer limited opportunities for pension contributions.

Lower Priority

When you’re carrying the mental burden of a household, as women often do, there are a million thoughts going through your head at any given moment. It’s unlikely that one of those is going to be about your pension.?

Divorce?

Often when women are going through a divorce they may forget or aren’t aware they may be entitled to their partners pensions. Again, if you’ve taken time off to look after children whilst your partner works, you could be entitled to some of their pension.?

Live Longer

Statistically women live longer than men, which means their pension pots have to last longer as we’re here longer.

Combatting the Gender Pension Gap

Luckily, your pension is in your hands, whilst there are factors in play that disadvantage women as a gender, these can be combated on an individual level.

Opt-in or Enrolment

Opting into the UK workplace pension scheme is an obvious choice that promises a multitude of advantages for employees. The workplace pension scheme offers a tax-efficient method of savings, with contributions made pre-tax, thereby reducing an employee's taxable income.?

The main benefit of this system is that other people’s money being paid into your pension, is the easiest and least stressful way of growing this! When you opt-in to the workplace pension, you will add 5% from your paycheque to the pension, your employer will add 3% and the government add 2% (potentially you can claim back more from your self-assessment depending on your tax band).?

Additionally, some employers offer matching contributions, effectively amplifying the savings potential. Ask your employer if you increase your contributions will they match them.?

Another thing to check with your workplace pension is the funds you are invested in. Many employers will put their employees into a medium-risk fund, typically younger employees can afford to have a higher appetite for risk as they have longer before they will be claiming them. But only invest in what you are comfortable with.???

Start Now

Anything you put away now will gain compound interest and snowball into a larger fund. By starting early, you allow your investments more time to grow and multiply, harnessing the potential of long-term returns. This early investment should translate into a larger retirement fund, it also encourages a disciplined approach to financial planning and a habit of saving.?

The earlier you begin, the more you can capitalise on the benefits of regular contributions, allowing you to navigate through the uncertainties of the future with confidence and peace of mind.

Don’t Stop

Continuing to contribute to one's pension remains crucial in securing a stable financial future. As individuals navigate the dynamic landscape of retirement planning, the significance of consistent contributions to a pension scheme cannot be overstated.?

Amidst the uncertainties of the economic climate and the evolving nature of employment structures, pension funds serve as a reliable cushion, offering financial security and peace of mind during retirement. Moreover, regular contributions to a pension plan not only can help secure financial stability but also foster a disciplined approach towards long-term financial planning, instilling a sense of responsibility and foresight in one's financial decisions.?

In a rapidly changing world, nurturing and prioritising a pension plan is an essential component of prudent financial management, facilitating a sense of reassurance and stability in an otherwise uncertain financial landscape.

Check your State Pension

By claiming your state pension, you not only access the financial support you've contributed to throughout your working years, but you also set a foundation for a more comfortable retirement.?

It is essential to plan and prepare in advance to meet the eligibility criteria, ensuring that you can enjoy the benefits of your state pension when the time comes.?

You can fill out a BR19 form on the government website to know if you are eligible for a state pension or if you need to make any additional payments to meet the eligibility criteria.?

Review Your Pension?

With pension planning playing a pivotal role in ensuring financial security during your retirement, staying informed about changes in state pension regulations and policies is crucial. Regularly reviewing your pension enables you to assess if you're on track for your retirement goals, it allows you to identify any gaps in your pension plan and take proactive measures to bridge them, ensuring a more comfortable and stress-free retirement.?

Get Help

As with most things, you can find advice and tips online, there are also endless TikTok profiles that promise to make you rich quickly. The reality is, similar to marketing, there isn’t a ‘one size fits all’ approach that you can take, and your investments and pension advice needs to be tailored to you.?

I appreciate that this is a lot of information for you to take in but the gist of it is the more proactive you are earlier on the easier it should be when you come to retire. Planning your finances for the future isn’t the easiest thing, so you should grab anything that makes it that little bit easier.