Women have 43 percent less in their pension pot than men by the time they reach 55, according to Royal London’s workplace pensions saving data.
Royal London’s research into workers’ retirement savings habits found that pension contributions differ significantly by age, job type, and income.
However, the data showed that the one consistent thing is that the gender pensions gap impacts women at every stage of their career, even though there is almost parity in pension participation rates between the sexes.
Gap increases with age
The data from nearly two million customers saving with Royal London revealed that women typically save less for their retirement throughout their working lives than men.
The gender gap is 16 percent when workers are in their 30s rising to 43 percent by the age of 55.
The pensions firm also found that perceptions that women were less likely to engage with their pension than men are not correct.
There is no difference between the sexes in terms of the importance they place on pensions as a workplace benefit. Rather, women are more likely than men to put pensions at the top of their list when applying for a new job.
Parenthood impact
The data showed that a key driver of the gender pensions gap is the different working patterns between the sexes. Many women take on lower paid part-time jobs to juggle work with caring responsibilities.
Researchers said that it was significant that around one million women below age 50 don’t work due to caring responsibilities, adding that this is an issue that disproportionately affects women.
Figures from the Office for National Statistics (ONS) show that older female workers are also twice as likely to take on caring responsibilities, which puts a dent in their retirement savings.
Missed employer matching
Many employers offer pension matching, so it’s encouraging that two-fifths of all employees put more than the standard amount into their pension each month to take advantage of this.
However, more men (48 percent) take advantage of employer matching contributions than women (41 percent). Affordability was found to be a key barrier for half of women, who point to this as the reason they don’t do it or don’t make full use of it.
Clare Moffat, pensions expert and head of technical and marketing compliance at Royal London, said: “Millions more women may now be saving thanks to auto enrolment, but we can’t escape the fact that parenthood and caring responsibilities interrupt women’s working lives. It’s an issue that affects their take home pay, career opportunities and ultimately their pensions savings.
“The decisions taken about stepping back from work, or reducing hours to care for children, have such significant implications for the future that it’s worth considering all the options. It’s not that a different decision would be reached, but many women look back and wish they’d known more at the time about the actions they could have taken.”
Longer retirements
She said that at the start of people’s career, there’s not much of a difference in the pension savings between men and women. But the effect of having a family and reducing their hours means the gap widens significantly as time goes by.
“So, at the point of retirement, women typically only have around £60 saved for every £100 that men have.
“And on top of that, on average, women live longer and therefore have longer retirements, so rather than less savings, they actually need more money for their retirement than men.
“It’s also nice to put the myth to bed that women are less interested in pensions. A move that hopefully shows greater empowerment and control of their long-term finances.”
In tandem with the release of this data, the pensions and investment company has called for greater efforts to shrink the gender pension gap.
7 top tips to beat gender saving barriers
- Start saving as early as you can, so begin saving for retirement as soon as you start working, and ideally, before you start a family. This means small amounts of money have the time to grow into larger sums.
- Review your pension savings regularly, at least once a year. As well as showing how much is in your pension, it will also let you know if you are on track for the retirement you want. Understanding how much you need in retirement is important. The PLSA’s Retirement Living Standards can help with this. Finding out about any potential shortfall sooner rather than later gives you time to take action.
- When you get a pay rise, try and allocate some or all of the extra money into your pension.
- If your employer offers pension contribution matching make use of it as this allows you to maximise your savings. Increasing your regular pension contributions using matching, if you can afford to, will really help build up your pension.
- Make a retirement plan. Not being prepared for retirement can cause a number of issues in later life. Think about when you want to stop work and, crucially, how you’ll spend your time when you retire. For example, if you enjoy meals out and weekends abroad now, will you be able to do the same in retirement? That will make it easier to work out how much retirement will cost you.
- Managing your pension can feel complicated, but there’s plenty of guidance and advice available and your pension provider may offer tools and calculators. Some employers offer sessions with a financial adviser to explain how pensions work. There’s also lots of information and guidance at the independent and government-backed MoneyHelper website. For more information on the help you need, tailored to your current circumstances, Royal London can help.
- If you are part of a couple, then plan for retirement together. Contributing to a spouse’s or partner’s pension and ensuring you’re both maximising the state pension entitlement are among the steps you can take to ensure the retirement you want.
