Gender pension gap: Women need to work extra 18 years to have same pension as men

·Contributor, Yahoo Life UK
·6 min read
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Women are experiencing a gender pension gap, which will see them have to work longer than their male counterparts. (Getty Images)

Women would need to work an additional 18 years full-time to save the same amounts of money into their pensions as men, new research which highlights a gender pension gap, has suggested.

While we're aware of the gender pay gap, turns out, there's something of a male/female divide when it comes to retirement funds too.

Women aged 65 will typically have accumulated £69,000 in private pension wealth, compared with average men’s savings of £205,800, according to workplace pension provider Now: Pensions and the Pensions Policy Institute (PPI).

With women living on average four years longer than men, they need to save more throughout their lifetime to accommodate longer periods in retirement, the report said.

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But just 27% of women work mostly full-time throughout their careers, compared with 45% of men, with women also spending an average of 10 years away from the workforce to start families and care for children and relatives.

This difference in the sexes contributes to both the gender pay and pensions gaps by presenting fewer opportunities for women to progress their careers and earn higher salaries.

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Childcare costs are also a hindrance to many working households with many women not earning enough in a single job to meet the £10,000 earnings trigger to be automatically placed in a workplace pension.

“Millions of women have not been able to save via a workplace pension, nor take advantage of their employer contributions and the tax relief,” explains Joanne Segars, head of trustees at Now: Pensions.

While Joeli Brearly, founder of Pregnant Then Screwed founder, says the gender pension gap will only be closed when women have equal access to the labour market.

What is the gender pension gap?

The gender pension gap is the shortfall between a woman’s typical retirement provision and a man’s. It’s often calculated using measures including average workplace pensions, private pensions and the amount of state pension someone receives when they retire.

Statistically, women have considerably less saved for retirement when compared to men. For example, figures from Prospect reveal the average woman’s pension currently pays out £7,500 less a year on average - that’s a whopping 40% less than men.

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New research has highlighted a gender pension gap. (Getty Images)
New research has highlighted a gender pension gap. (Getty Images)

“Research consistently shows there is an enormous discrepancy in the amounts that men and women have available when they retire," explains Sara Benwell, pensions expert at money.co.uk.

“The pensions gap exists for several reasons – many of which are a result of systemic failures to protect women. There is a direct link to the gender pay gap, and as long as women are paid less than men for the same roles, a shortfall will remain."

Benwell says there are other critical factors at play here too.

"These include a shortage of women hired into senior management positions, the fact that caring responsibilities still fall largely on female shoulders, gaps in pension saving, the lack of career progression due to maternity leave, and the higher number of women in low-paid or part time careers."

Women are also more likely to be self-employed or work multiple jobs – both of which are penalised under the current pensions system.

“Lack of government action to tackle many of these issues means that women are trying to save in a system that consistently fails them, and is not built for their needs," Benwell continues.

"Many female workers must plan years, and sometimes decades, ahead to bridge the gender pension gap. They often need to save a higher proportion of their income from an earlier age – to have the same retirement opportunities than men.”

What to do if you don't have a pension

While experts are calling on the government to create a system where women can save adequately for retirement to bridge the current gap, there are some steps women can take to help boost their retirement earnings.

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Enrol in a workplace pension

“This is a good place to start," says Benwell. "Even if you don’t meet the auto-enrolment threshold of £10,000 a year from a single employer, you can still ask to join the company scheme.

"If you earn over £6,240 a year, you’ll get company contributions (free money from your employer) and if you earn less than that you’ll still get the benefit of tax relief (free money from the government.

Boost your existing pension

If you’re already enrolled in a workplace pension, Benwell suggests trying to maximise the amount you get from your bosses.

"Some offer something called ‘matching’ which means they’ll give extra if you do," she adds. "Some will even double whatever you pay in! Even if your company doesn’t ‘match’ it’s worth boosting your contributions – you’ll get a handy tax relief boost."

A good time to do this, according to Benwell, is after a pay rise or promotion, as you won’t even notice the cash going missing.

Women will need to work an extra 18 years to have the same financial freedom in retirement. (Getty Images)
Women will need to work an extra 18 years to have the same financial freedom in retirement. (Getty Images)

Look to a private pension

If you don’t have a workplace pension to contribute to, Benwell recommends opening a private one and paying in to that.

"There are no company contributions, but you’ll still get tax relief," she says. "Remember that the earlier you start saving, the more effective this will be thanks to the power of compound interest.”

Claim National Insurance Credits

If you’re not in work due to pregnancy, childcare or other caring responsibilities. "Many benefits – including child benefit – automatically give you NI credits," says Benwell.

"One reason many women don’t sign up for child benefit is because their partner earns over the £50,000 limit when you have to start paying it back.

"But you can claim the benefit and tick a box that says you won’t receive the money, which cuts down on admin and protects your NI record and state pension," she adds.

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Check in on your state pension

By making sure you’re on track to get the full amount, which you can do on the government website here.

"You need 35 years of NI contributions to get the full amount, and you can buy additional years if you don’t have enough," Benwell adds.

"Don’t buy extra if you have enough working years left to receive all the contributions you need."

Tax relief is key

Benwell suggests making sure you’re getting all the tax relief you’ve earned by saving into a pension. "For instance, if you are self-employed, you can claim the relief through self-assessment," she says.

Most employees get tax relief automatically which is worth between 25-45%.

"The amount of relief you get depends on what income tax rate you pay. Higher earners might have to claim back the extra through self-assessment. Private pension savings all benefit from tax relief."

Additional reporting PA.