The gender pension gap is openly recognised as a significant problem. Yet, despite heightened media attention, the issue persists, and progress is glacial.
According to World Bank, there’s still a startling disparity in retirement outcomes with women's pensions between 25% to 30% lower than those of men.
There are multiple reasons for this, including that women typically:
- Are paid less
- Are less likely to hold senior leadership positions
- Take breaks during their career to have children
- Work part-time or reduced hours to accommodate caring responsibilities.
Divorce is another problem area that can affect women's pension pots.
Separation can have a significant impact on pension and retirement income because women are more likely to focus on retaining the family home. This means they often waive their rights to their partner's pension. On top of this, many also experience a fall in annual income following divorce.
International Women’s Day inspires important conversations and encourages change and advancement. So, to mark this day on 8 March 2024 and help forge women’s economic empowerment, here are five measures you could take if you’re concerned that your pension savings may be insufficient.
5 key steps to help narrow a gap in your pension savings
1. Make consistent contributions to your pension
One of the biggest benefits of using a pension to save for retirement is the tax relief.
In the UK, when you contribute to your pension, some of the money that would have been paid to the government in tax goes into your pension instead.
If you're a basic-rate taxpayer, you’ll pay just £80 for every £100 contributed towards your pension (2023/24). Meanwhile, higher-rate and additional-rate taxpayers will pay £60 or £55 respectively – though you'll need to claim the additional relief through self-assessment.
While tax advantages take different forms in other countries, increasing the amount you contribute to your pension as much as possible could offer a significant boost to your pot, which could help to provide more income in retirement.
2. Talk about pension savings with your partner
One of the most constructive steps you could take is to discuss pension savings with your partner.
For example, if your partner is earning while you’re taking time off to care for your children, they could contribute to your pension for you instead.
This could be in addition to their own pension contributions, or they could divide what they would usually pay between their own savings pot and yours.
3. Track down any lost pensions
If you've changed jobs regularly, you may have lost track of pensions as your career has progressed. As an expat, you may have multiple pensions in different countries.
Tracking down your lost pensions could help to increase your retirement pot.
Even if you haven’t left a pension behind as you've progressed through life, if you have multiple different plans, it may be useful to consider consolidating them into one easy to manage pension scheme. This could help you save on fees and may improve potential growth, too.
Read more: Pros and cons of combining your pension pots. Is it the best move for you?
4. Save or invest additional income when your salary increases
With hope, your salary will likely increase throughout your career. While it may be easy to allow your everyday expenses to creep up at the same rate as your income, consider saving or investing a portion of your additional income.
Instead of spending the extra money you have coming in, you could use it to boost your cash savings, invest your income, or increase your pension contributions.
In this way, you could use your pay rise to help improve your long-term financial wellbeing.
5. Pay attention to where your retirement savings are invested
Various scientific studies have found that women tend to take less risk than men when investing.
Though there is nothing “wrong” with this approach, low risk investments typically have less scope for generating high returns. As a result, if you play things too safe, you may find it more difficult to achieve the growth needed on your pension savings.
With this in mind, make sure you pay attention to where your retirement savings are invested. One way to achieve this is to ensure your investments are well diversified and that you have taken an appropriate level of risk for your circumstances and goals.
We can help you balance the risk you’re willing to take with the returns you need to meet your long-term goals.
Get in touch
With extensive experience in advising clients about retirement planning, we’re here to help.
If you’d like to discuss ways you could boost your pension savings or secure your financial future, please get in touch.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
