Gender Pension Gap- How Women Can Secure A Better Retirement

The gap in saving for retirement and the gender pay gap have narrowed in recent years, particularly for women under age 35.  That is largely thanks to more women in the workforce and the introduction of auto enrolment. However, the overall gender pension gap at age 65 is still significant, with women owning one third of the pension assets of a man on average. *

The gap arises largely due to women taking time away from work, going part time or choosing less demanding roles to fit around their family responsibilities.

Whether someone chooses to be the main carer in a family or to pursue a career is  a matter of personal choice but those  who choose the former and give up the opportunity to build a bigger workplace pension can take steps to fill the pension  gap, even if not in paid employment.

Here are our top tips: -

  • Before taking a career break, maximise pension saving and join your employer’s scheme. Explore salary sacrifice as a means of boosting your savings for a lower cost. Increase your pension savings every time you have a pay rise and if you get a bonus consider making a one- off top up.
     
  • Continue in the employer pension scheme while on maternity leave, the employer will often pay the full contribution and scheme members usually lose more than they save by opting out. https://www.aspirafp.co.uk/aspira-inform/avoiding-motherhood-penalty
     
  • When leaving a job don’t forget about the pension. If it is a pension pot, dependent on savings and investment returns, you can usually continue to save with it and review the funds you are invested in. If you have lost track of pensions here’s how to find them. https://www.aspirafp.co.uk/aspira-inform/keeping-track-pensions
     
  • Just because you are not employed or self -employed does not mean retirement saving has to stop. Up to £2,880 per year can be paid in and will be topped up by up to £720 of tax relief, even if not a taxpayer. Savings can be as little as £20 per month and for every £8 saved £2 is added by HMRC.
     
  • If it is a defined benefit pension, which pays a guaranteed income at retirement, leaving it in the scheme is usually the best option, but do let the scheme know if you change address or your name.
     
  • Get credits for State pension by applying for child benefit or carers credits if eligible. If under State pension age, looking after family member’s children under age 12, you may be eligible for up to 9 years state pension credits currently  worth £260 per annum of pension for each year claimed.
     
  • Talk about pensions and long-term income to a partner, each should understand how much the other would get from pensions and life assurance and fill any gaps with savings or insurance.
     
  • Many employers provide valuable life and health insurance benefits, leaving work does not mean having to leave these behind, ask your employer about options to continue these benefits, or shop around to find replacement insurance.
     
  • It’s never too late to start increasing your retirement income, shopping around at retirement can improve the income you can secure with pension savings and options such as topping up your State pension with free credits or voluntary NI contributions can be explored.
     
  • It’s never too early to start saving for retirement, children can have a pension plan arranged for them and this can be a tax efficient way for grandparents or others to pass money on.
     
  • Aim for equality of retirement income, it is far more tax efficient than one partner owning all the pension and the other having none.

These tips and many more are included in “Pension Gender Gap- a practical guide to closing it.“ Published by LEBC to help women and men have a better retirement. Download your free copy here.

*Pensions Policy Institute July 2019 Understanding the Gender Pension Gap

Kay Ingram                         
Public Policy Director                                               
November 2020

Please remember, no news or research item is a recommendation or advice to buy. Aspira Corporate Solutions is not responsible for accuracy and may not share the author’s views. The contents of this blog are for information purposes only and do not constitute individual advice. All information is based on our current understanding of taxation legislation and regulations. The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts.

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