A new report highlights the ways women can help reduce the average £72,500 gender pension gap.
The average gender pension gap could be as much as £72,500 after a lifetime of saving, according to a new report.
The report by the National Employment Savings Trust [Nest] says women face extra challenges when saving for retirement. Systemic issues – like greater numbers of women working in lower-paid and part-time jobs, often due to caring responsibilities,– mean they have less to put into their pension. It also points out that women also live longer than men – on average by 3.7 years – so need their pension savings to last longer.
Nest surveyed women over the summer and found they were significantly more likely than men to say they were only just about managing to make ends meet financially and nearly half felt the pandemic would have a significant impact on their finances.
Its report points out ways that women can make small steps to increase their future pension pot. It says workers should opt into their workplace pension as soon as they can, from the age of 18, so they can benefit from both employer contributions and tax relief, effectively doubling their contributions. If they can, they should add a small sum to their standard rate. Nest calculates that adding as little as £2.50 a week extra to contributions could grow a pension by £13,600 by retirement time.
The report says it is worth finding out whether an employer will match pension contributions and use that to increase pension payments and the overall sum you will receive.
The report also states that during parental leave, many workers are entitled to full employer pension contributions based on their usual salary rather than statutory pay. It calculates, based on the average salary, that steady employer contributions during two 12-month maternity breaks could mean an extra £1,700 in women’s pots.
Nest’s Director of Strategy and Corporate Affairs, Zoe Alexander, said: “Women face systemic challenges in saving as much as men do for their retirement – these begin at the start of their working life and have a ripple effect throughout their life as they juggle conflicting priorities, lasting well into retirement. It looks like the ongoing impact of Covid-19 could also disproportionately affect women and may further undermine their pension savings potential.
“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.
“This is why we’ve produced this report – we want to make sure women have the right information about what they’re entitled to from their employers and their pension scheme, and we want to help our employers support their staff.”