Women are retiring on pension funds a fifth the size of men’s, but can narrow this gap by taking practical steps to boost retirement savings, according to a new guide.
The pensions chasm at retirement is far wider than the 18 per cent gender pay gap recently revealed by the Government.
That’s because, in addition to having lower salaries, women are more likely than men to have career breaks, take part-time jobs and have caring responsibilities, explains financial adviser firm LEBC.
Its tips for women to ensure they end up with decent retirement savings include maxing out tax perks, keeping up contributions during maternity leave, merging old pension pots and claiming state pension credits.
Wage and pension gaps: Women can try to ensure they are paid the same as men, as well as making fuller provision for old age
At age 65, women have average pension savings of £35,800, some 20 per cent the size of £179,000 pots held by men, a report by the Chartered Insurance Institute last October revealed.
Meanwhile, the latest 17.9 per cent gender pay gap figure, published by the Government Equalities Office using ONS figures, has barely shifted from 18.4 per cent the year before.
‘Women who take on caring roles for the family need not sacrifice their own financial wellbeing to do so; they should ensure that part of the family budget is set aside for their future,’ says Kay Ingram, public policy director at LEBC.
‘This will benefit not just them in retirement, but their partners too. A couple are better off with two pensions funding their retirement than relying on the one.’
Ingram, who wrote the guide ‘Gender Pension Gap – A Practical Guide on how to close it’, adds that women can try to ensure they are paid the same as men, as well as making fuller provision for old age.
‘We eradicated our gender pay gap within a year!’
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‘Women need to be proactive about asking for a rise, putting themselves forward for promotion and even if they wish to work flexibly or part time not excluding themselves from grasping opportunities which could lead to career advancement,’ she says.
‘Women appear to have a tendency to expect recognition for their achievements and hard work to be forthcoming from their employer without them highlighting, for the employer, their contribution and potential.
‘Men are generally more adept at doing this and will often exaggerate their contribution and potential , while the women who did the hard work let them take the credit and hope the boss will see through this.
‘The biggest contribution to women’s equality at work does not emanate from the workplace but from the home. My top tip is choose a partner who will consider your career and aspirations to be as important as his own and will see his role as a parent to be equally important with his own aspirations at work.’
LEBC’s advice to women about improving their pensions – much of which will be useful to men too – include:
Pension growth: Starting to save early means you enjoy the compound effect of investing over long periods. Figures above are based on investing until the age of 65 with a total contribution of £125 a month – but £100 when you take the tax relief top-top into account (Source: LEBC)
* Ensure you continue to make contributions to a pension plan during career breaks
* Before taking breaks, maximise your pension savings and mop up annual allowances from earlier years
* When joining a new employer, always ask about the pension scheme
* Don’t abandon old employer’s pensions, and look into consolidating them with new ones
* Stay enrolled in a pension during maternity leave, because leaving costs more in lost employer contributions and tax relief than you save in the short term
* Claim free credits towards the state pension by signing up for child benefit, even if your family earns too much to get the payments
* Claim the Marriage Allowance and the childcare subsidy of up to 20 per cent of childcare costs, because this free money will help to make retirement saving affordable
* If you buy an annuity at retirement, shop around because annual pensions can be up to 8.34 per cent more if you are healthy, 17.17 per cent if you are a smoker, and up to 50 per cent more if you are in poor health.
Women are woefully underprepared for retirement compared with men, according to separate data published by financial giant Aegon last summer.
It found 15 per cent of women have no pension arrangements compared to 11 per cent of men, and 6 per cent of women say they have ample funds set aside compared to 13 per cent of men.
Meanwhile, its research found one in three women were unsure of how much they have saved for a pension, compared to one in five men.
In response, Aegon created a 10 step to-do list everyone – women and men – can follow to sort out their pension.
A study by AJ Bell discovered a woman on average pay who takes a two year-long maternity break from work could see their pension pot slashed by £25,500.
Mums can lessen the hit to their savings if they still pay pension contributions out of their lower maternity pay – this forces employers to keep forking over their usual full top-ups.
A woman who takes a five-year break to care for children and then returns to work part-time stands to forfeit £100,000-plus of pension if they cancel contributions, AJ Bell found.
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