Nest draws up battleplans to tackle the gender pensions gap, including starting earlier and employer payment reforms.
Women are retiring with pensions on average £70,000 smaller than men, research shows, but saving just a few pounds more a week could drastically improve their pots.
An average woman working full-time in the UK could have a £41,000 gender pension gap at retirement, analysis by pension provider Nest found.
Based on the overall average UK wage, which includes part-time work that is more often done by women, this gap widens to £72,500.
Financial modelling by Nest looked at ways to bridge the gap. Paying an extra £2.50 into a pension each week could grow it by another £13,600 by retirement. Starting pension saving as early as possible, at age 18, could add as much as £12,500 to a final pot.
Employers also have a role to play in boosting their staff’s pensions. Companies that match staff contributions up to 5% of their salary – the employee minimum including tax relief – could put an extra £22,300 into the pot without the employee having to pay anything extra.
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Automatic enrolment – where workers are put into their company pension unless they opt out – has led to millions more people pension saving in the UK. But women’s lower salaries and time out of the workforce to raise a family mean they still end up with significantly less in their pension pots than men.
Helen Morrissey, pension specialist at Royal London, said: “While women have benefited from auto-enrolment this changes once they leave the workforce either to have children or carry out other caring duties.
“A mix of part-time work and time out of the workforce blows a hole in their retirement planning that is difficult to recover from and the cost of childcare can deter many women from resuming pension contributions at a later date.”
Morrissey called on the government to look at how it can keep women in pensions for longer, such as providing good quality childcare at a decent cost and providing more information around maternity leave and its impact on pensions.
Systemic issues – like greater numbers of women working in lower-paid and part-time jobs – mean women have less to put into their pension. Women also live longer than men – on average by 3.7 years – so need their pension savings to last longer.
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Covid-19 is also hitting women’s finances. Surveyed at the height of lockdown in June, women saving with Nest were more likely than men to say they were only just about managing to make ends meet financially (34% vs 25%). Nearly half felt the pandemic will significantly harm their finances.
Knowing their rights will help women keep as much in their retirement pot as possible.
During parental leave, many workers are entitled to full employer pension contributions based on their usual salary, rather than statutory pay. Based on the average salary, steady employer contributions during two twelve-month maternity breaks could mean an extra £1,700 in women’s pots.
Zoe Alexander, Nest’s director of strategy and corporate affairs, said: “Women face systemic challenges in saving as much as men do for their retirement from the start of their working life, creating a ripple effect. It looks like Covid-19 could also disproportionately affect women and their pension savings.
“In times of financial instability, where every penny counts, pension contributions can seem like a luxury. But starting early and continuing pension contributions, if you possibly can, is the best way to futureproof your financial wellbeing in retirement.”
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