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Equal Pay Day was on Tuesday 31st March 2020, which is a day dedicated to raising awareness of the gender pay gap between men and women. However, did you also know that there is a pension pay gap? And I’m not talking pennies either, it’s an enormous gap.
According to research conducted by my own pension provider, PensionBee, men aged 50 plus have 51% more in their pension pots than women of the same age. For those under 30 years old, there is a 23% pension gap, with the average male having £4,129, whereas women only have £3,192 in their pots.
This is a horrifying statistic, and unfortunately the gap only grows with age, so in this post I am going to look at why there is a pension gender gap and how women can retaliate against it.
Why is there a gender pension gap?
There are many contributing components to the pension gender gap, although one of the most obvious ones is that women are more likely to take time out from their jobs to raise children.
They may take maternity leave, work more flexible hours, go back to work part time or not go back to work at all. If they have taken a hit in pay from doing so, pension contributions are usually based on earnings, therefore the chances are their retirement savings have also taken a blow.
And the more children that a woman has the more time out they are likely to take, which leads to an event bigger pension gender gap.
It’s often not practical for both parents to return to work full time, as UK childcare costs have continued to rise over the previous years.
This means that if a woman goes into part time work, she will not be automatically enrolled into the company retirement plan if she is not earning more than £10,000 a year. And if her earnings are less than £118 a week, she will not receive any National insurance credits toward the state pension.
Currently, 35 years of National Insurance contributions is needed to claim the full state pension, which is £9,110.40 a year. Even though the state pension age is 65 for both men and women, women typically live for several years longer than men, which means that they are forced to survive on little money from their state pensions.
If you are looking into putting all of your existing pensions into one pot, you can sign up to PensionBee within minutes and it is completely free to use. You can sign up on their website using this link.
How can women fight back on the pensions front?
There are a few steps women can take now to protect their finances in later life.
If you are on maternity leave, you can look at increasing your pension contributions. This may not be possible for everyone, and it depends on each individual’s situation.
You can also take advantage of Shared Parental Leave (SPL), which may allow you to share leave with a partner and/or split up periods of leave. Parents can take up to 50 weeks as SPL, and a maximum of 37 weeks of Shared Parental Pay.
The rights to this legislation applies to mothers and fathers, married couples, civil partners and cohabiting partners, and same or opposite sex. However, it is less common to take this route as many companies offer higher maternity pay than Shared Parental Pay, but it is an option that will allow you to still contribute towards your pension pot.
You should also aim to start saving into your pension as early as possible, you can read about why I decided to start saving into my pension at age 18 here.
Remember the earlier you begin contributing, the more you can benefit from compound interest.
Another option is to track down your pension pots from previous employers, as if you still have several more years until you retire, you can afford to switch to higher risk investments in the hope of higher returns.
This post was written in collaboration with PensionBee, however all opinions are my own. PensionBee is authorised and regulated by the Financial Conduct Authority. Nothing in this post should be taken as financial advice. As with all pensions, your capital is at risk and your pension can go down as well as up. You may want to consider advice from a qualified IFA.
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