Gender Gap in pension savings worsens due to pandemic
Recent research shows that the pandemic has further increased the gender gap in pension savings.
The research, by the Centre for Economics and Business Research (CEBR) shows that the gender gap in pension savings is now £183,936. Last year this was £157,263 – a £26,673 difference.
Women typically have smaller pensions than men because they are generally paid less, are less likely to hold higher-paid roles and are more likely to take time out of full-time work for childcare and caring roles.
The growth in the gap though seems to be because women’s finances took a heavier hit from the pandemic.
Effect of the pandemic
Some 30% of women polled for the study said their financial situation had worsened since the start of the pandemic compared to 24% of men.
More women than men were furloughed according to HMRC, which has impeded their capacity to save money for their pension pot. The disparity could be attributed to women being more likely to work in sectors hardest hit by the pandemic.
Gender gap in pension savings: future expectations
Men are anticipating an annual retirement income of £20,712, whereas women expect their income will be £14,964 in later life. This is despite the fact that women contribute more into their pension pots in percentage terms than men.
Women put 9.4% of their income into their pension pot. In comparison, men only use 8.3% of their income for their pension pot. This is due to the difference in average earnings of each gender in 2020. Men are able contribute £3,184 to their pension pot, whereas women can only afford £2,340.
The result of all this, according to the research, leaves the average woman needing to work an additional 14 ½ years before retiring to have pensions equal to their male counterparts.
In addition to this, the research found that women have lower incomes in retirement across all lengths of their working life, as men who have worked full-time for 30-34 years receive the highest average annual retirement income of £22,776, while their female counterparts receive £17,004.
Can women offset the gender pension gap?
There are no quick fixes to some of the causes of this problem – like men earning more, or women being more likely to shoulder childcare responsibilities.
But there are some things women can do to maximise their retirement pots.
Firstly, if you take time off to look after children or care for a loved one, set up a private pension and pay into it if you are able to.
Having the cash to spend now might seem preferable but putting it into where it will be invested could make it worth a lot more come retirement.
Secondly, if you stop working to care for a child, remember to check if you can claim child benefit. This is not just a helpful income boost – claiming it means you will continue to get the full amount of state pension you’re entitled to when you retire.
Currently if you claim child benefit for a child under 12, the government maxes out your National Insurance contributions for that period.
Also – if you are working and have a workplace pension, max out your contributions if you can. This means losing a bit extra now but will hopefully be worth more in retirement.
Get in touch
There are investment options available which can help you maximise your earnings in retirement. For tailored advice contact Cowgills Wealth Management Team on 01204 414 243.
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The information was correct at time of publishing but may now be out of date.