The gender pension gap – what you can do to close it
Women could have around £100,000 less in pension savings than men when they reach retirement age, according to research from Scottish Widows.
This gender pension gap is caused by a number of factors, including:
- Continued discrepancies in pay between men and women.
- Women take longer periods of time off to have and raise children.
- Women are more likely to work part-time to care for children and other family members.
- Gaps in National Insurance records mean some women can miss out on State Pension entitlement.
- Pensions may be overlooked in divorce settlements.
In its latest ‘Women and Retirement’ report, Scottish Widows found that women have significantly smaller retirement savings pots than men: 56% of women are set to receive income from a defined contribution pension, with the average pot worth £151,000. This compares to 68% of men, whose pots are valued at £281,000 on average.
What can be done to close the gap?
Potential auto-enrolment legislation changes such as lowering the age requirement from 22 to 18 and removing earnings limits, so even small earnings will qualify for contributions and tax relief, would help. According to Scottish Widows, 1.4 million women earn under the £10,000 p.a. auto-enrolment earnings trigger.
Scottish Widows is also calling for joint annuities to become the default option when presented by annuity providers. Unlike single-life annuities, they pay income to a partner after the holder’s death. This offers better financial security to women, who often live longer than men.
Five steps to keep your pension on track
1. Start saving early
Saving into your pension as early as possible can make a big difference. Consider increasing your pension contributions to help stay on track for a comfortable retirement. If you’re a current Dell Team Member, Dell will match your contributions by up to 10% of pensionable salary if you contribute 5%.
2. Claim National Insurance credits
The State Pension forms a significant part of most people’s retirement income, but what you’ll get depends on your National Insurance record. Visit gov.uk/check-state-pension to see your current entitlement and identify any gaps.
If you take time out of work to raise children, you’ll stop paying National Insurance contributions on your income. However, claiming child benefit for a child under 12 ensures you automatically receive National Insurance credits.
3. Stay on top of career breaks
Taking time off or reducing hours to care for children can have a big impact on your pension. According to Scottish Widows, this can widen the gender pension gap to as much as 50%.
If you’re part of a couple and one of you earns more than the other, or one is taking time out to have a baby while the other carries on working, you could decide to even up both pension pots by having the higher earner pay into the lower earner’s pension. Policies such as shared parental leave can also reduce the financial burden on one parent.
You may want to increase your payments into your pension pot when you return from leave, and you could also make a one-off lump sum contribution to catch up.
4. Track down lost pensions
If you’ve changed jobs or moved house, it’s easy to lose track of old pension pots, but reclaiming them could make a big difference to your retirement savings. To do this, visit MoneyHelper.
5. Don’t forget about pensions if you get divorced
If you’re getting divorced, make sure you include pensions in your financial talks. Request a pension valuation and think about a pension sharing order to split the funds fairly.
Want to know more?
To find out more about pensions, savings and taxation, visit MoneyHelper and go to ‘Pensions and retirement’.
Disclaimer This newsletter is for information only and does not constitute financial advice. The Trustees cannot give you advice on your pension options. Before you consider making any changes to your contributions or method of investments, you should always seek professional, impartial financial advice.