As financial wellbeing among women becomes more and more of a hot topic, there’s one area of finance in particular that clearly demonstrates the gender gap in financial health: pensions.
The huge shortfall between women’s pension savings in their sixties – compared to the national average and that of men – was revealed in unique research by NOW: Pensions and the Pensions Policy Institute (PPI). The report revealed that women have, on average, only 28% of the pension savings of men, that’s over £145,000 less than men by the time they reach retirement age. There’s also reason to believe that this will have been greatly exacerbated by the Covid-19 pandemic, with women bearing the brunt of emergency childcare during three lockdowns.
Being at a statistical and practical disadvantage means that it’s absolutely vital for women to prioritise their financial health as soon as possible, rather than putting off thinking about how they will fund their retirement. The latest NOW: Pensions research does contain some good news, showing that there are now 600,000 more women across the UK working full time, and workplace pension saving is up by 4% to 64% since March 2020 – so it’s vital that we grasp the opportunity to get pension-savvy and make sure that we’re saving enough for a happy retirement. Here are some tips for prioritising your pension without giving up all of life’s pleasures:
Millennial women could face ‘retirement poverty’ due to the gender pay gap (and need to work 37 years longer to catch up with men)
1. Start thinking now about when you might like to retire
We all have a different vision for what we’d like our later life to look like – some people are focused on retiring as early as possible, while others envisage a longer working life. No matter your age, it’s a good time to start considering when you might like to retire and how much you would need to live comfortably once you stop working.
You can use an online tool to help you to work this out, such as this pension calculator from the government’s MoneyHelper service. And have a look at the Retirement Living Standards, which suggest minimum retirement income levels for different standards of living.
2. Make sure you’re well-informed about your current pension
Getting informed about your current pension plan is a great step towards understanding and prioritising it, and there might be some smart decisions that you can make now that will really pay off later on.
Do you know how much you’re paying into your pension, and how much your employer is contributing? Do you also know what funds your pension is being invested in?
When your pension is just automatically deducted from your pay each month, it can be easy to forget about it – or even resent it a little.
NOW: Pensions research suggests that, in order to draw the same pension as our male counterparts, women would have needed to save 5-7% more of their incomes than men. If this isn’t feasible, that’s fine – but it’s something to bear in mind when thinking about your financial priorities.
3. …and the pension pots you’ve collected from previous jobs
With an estimated £19.4billion in unclaimed pension pots in the UK, it’s really important to make sure you’re keeping track of any pension savings you’ve grown in previous jobs, as these could make a big difference to your overall pot. So, now’s the time to rifle through old paperwork and make sure that your address is up to date with previous providers. If you don’t have a paper trail, you should be able to track down old pots using your national insurance number and a few other details using the government pension tracing service. If you’re just at the start of your career, make sure that your pension documents are filed away with other key documents such as your employment contract, and that you know where they are – it will make things so much easier later on.
A really simple guide to pensions and ensuring you can retire on your own terms
4. Be aware of the effect that life changes can have on your pension
Things like divorce, relationship changes and having children can have a huge impact on your capacity to save. In fact, single mothers hold just £18,310 in median pension wealth by the time they reach retirement – just 9% of the average of £203,200 for men. Going on maternity leave, taking a career break or moving to part-time work to look after children can have a big impact on savings.
It’s often entirely unintentional, because you don’t even think about the future impact of a short-term loss of earnings, but that doesn’t make the impact any less. Nobody wants to think about the possibility of the future breakdown of a relationship or marriage, but it’s very important to get your ducks in a row when it comes to pension contributions. If you are divorcing, it’s really important to take pension savings into account as your pension savings are often the second biggest asset in a marriage, after property.
5. Remember: it’s never too early – or too late – to plan for your pension
Like most things you can do for your financial health, the best time to start focusing on your pension is right now. Instead of putting it off until later or lamenting that you didn’t think about it earlier, take practical steps right now to get yourself on the right track. It might seem daunting, especially with some of the headline figures for retirement funds seeming so out of reach, but in prioritising your pension now, you can make a huge difference to your financial wellbeing and sense of security in later life. NOW: Pensions is lobbying for some big policy changes that would bring an extra three million women into workplace pension saving.
Through a combination of more supportive policies and individual action, we can build a better financial future for women who want to retire – you included.
Samantha Gould, head of PR and campaigns at NOW: Pensions comments: “The gender pensions gap is a problem that has been hiding in plain sight for far too long. Ever since it became compulsory for firms to report their gender pay gaps, we have been fighting to highlight how this leads to the huge gender pensions gap and inequalities that we see in the pensions system.
“We know that it is women who have had to bear the brunt of childcare responsibilities since the first lockdown in March 2020, so it’s positive to see that there are now 600,000 more women working full-time than before the pandemic – made possible by the wide adoption and acceptance of flexible working.
“Coupled with personal savings being at an all-time high, we are now in a place where we might be able to close some of these huge pension savings gaps and help women save for a more financially secure future. As we ease out of lockdown restrictions, this could be the start of a new era of women’s financial empowerment. We continue to lobby the government for policy change to get another three million women saving for their later life. The future is now!”
We need to talk about pensions: why single women fall behind, and what to do about it