Posted on: 19th Mar 2019
After years of working for less pay, women are left with smaller less than a third of the average pension wealth. According to research by PensionBee, there is a 31 per cent difference between male and female pension pots. With this in mind, what can women do to fight the gender pension gap?pots. In fact, the average divorced woman has
The gender pension gap hits women while they work
If women earn less, they have less to contribute to their. Auto-enrolment contributions are based on a percentage of your salary. However, if you are earning less than your male co-worker, you will also be contributing and saving less. The good news about pensions is that for every £100 contributed by a basic rate taxpayer, the taxman will contribute an additional £25.
Tax relief on pensions is more attractive for higher-rate tax payers. This means that women who don’t meet higher tax brackets may be less inclined to pay into a pension. Those who do pay the higher tax rate can claim an extra 20 per cent tax relief via their tax return, or an extra 25 per cent tax relief for additional rate taxpayers.
The gender pension gap hits women when they stop working
Women’s pensions don’t just take a hit while working. Women are more likely to take time off work for childcare or taking care of vulnerable family members. This causes the pension pots to be cut thanks to the “motherhood penalty”. Many women stop contributing while on maternity leave in an attempt to make ends meet. Once returning to the workforce, restarting contributions can be difficult. This is because if you don’t have cash coming in, how can you pay into a pension? Long career gaps with almost no pension saving for a number of years can be a huge disadvantage.
Women who choose to return to work on a part-time basis receive a lower salary, therefore making smaller contributions. Almost 75 per cent of part-time employees in the UK are female, meaning that women are disproportionately affected. What’s more, those who face limited promotion prospects due to career breaks or part-time positions will miss out on increased salaries and increased pension payments.
However, the gender wealth gap is beginning to close at younger ages. According to recent figured by the ONS, women between the ages of 18 and 44 actually had larger estates than men of the same age. The average personal wealth was £175,200 for women, compared to £152,000 for men, between 2014 and 2016. Other age groups showed that men still had estates worth more than women. Paying more into your pension early in your career whenever you can will help narrow the pension gap come .
Fight back on the pensions front
It is extremely important for women to get more money into their pensions. Here are some things you can do to help narrow your own gender pension gap.
- Contributions – When paying into a workplace pension, your employer must also do the same on your behalf. What’s more, you get tax relief on top.
- Save early – The earlier you save, the more time your contributions can benefit from compound interest.
- Additional contributions – Whenever you are in the financial position to do so, add extra to your pension funds. This is especially important if you’re thinking about raising a family.
- Maternity leave – Some employers will continue to pay into your workplace pension while you are on maternity leave, so be sure to check to avoid disappointment!
- Child benefits – Even if you’re not entitled to payments due to your partner earning over £60,000 a year, it’s worth looking into. You could miss out on national insurance credits towards a big part of your State .
- Family Budget – If you’re part of a couple and one person takes time out for caring responsibilities, plan how to fund their pension out of family income.
- Make the most of your pension money – trace old pension pots from previous employers and any private pensions, then see where your money is invested and how much it costs. If you have several years to retirement, you can afford to choose higher risk investments in hopes of higher returns.
- Talk to an Independent financial adviser to help you make the best financial decisions.
So, don’t let the gender pension gap get in the way of you enjoying a comfortable retirement. There are many ways in which you can make the most of your money and having an independent financial adviser can do even more to boost those savings. Get in touch with Haven IFA to see how we can prepare you for an enjoyable retirement.