As we get ready to celebrate International Women's Day on the 8th of March, it seems like the perfect time to talk about one of the biggest challenges facing women in the UK: the gender pension gap. This gap not only highlights the inequalities women face during their working lives, thanks to the gender pay gap and unpaid caring responsibilities, but also for women's financial security in their retirement. But, there is a proactive step every woman can take to help close this gap: increasing your pension contributions.
The gender pension gap is wider than ever
Recent data from Profile Pensions’ 27,000 customers paints a worrying picture: male customers in the UK have an average pension pot of £36,326, while women are a long way behind with an average of £20,658*. This stark 76% difference shows the urgent need to close the gender pension gap and make sure everyone has access to a brighter financial future.
There’s a 20% gap in pension contributions each year
Digging deeper into the data, research from the Department of Work and Pensions (DWP) reveals a 35% gender pension gap in private pensions**. But that’s not all, there's a very big pension contribution gap too, with women contributing £52.0 billion compared to £62.6 billion by men into workplace auto-enrollment pensions in 2021. This 20% gap in contributions each year will widen the overall pension gap over time, as over a period of 30 years, these lower contributions could mean lower compounding interest and a smaller pot in the long run.
Women would have to work an extra 19 years to retire with the same pot as men
On average, women would need to work an additional 19 years to retire with the same pension savings as men. A report by NOW:Pensions and the Pensions Policy Institute forecasts that by the age of 67, women will have average pension savings of £69,000, falling far behind men, who have £136,000 more in their pension pot.
Women are 60% more likely to be unpaid carers
One of the key things creating this gap is the working patterns of men and women. Women are much more affected by career breaks, often taken as maternity leave and then to provide childcare for their children. Research shows that women are 60% more likely to carry out unpaid work and primary caregiver roles than men, completing an average of 26 hours per week to caregiving responsibilities.
By age 59 over half of women are caring for elderly relatives
As well as caring for children, women are also much more likely to take the role of caring for elderly parents or relatives - which can also reduce their earning potential and effecting women's pension contributions. Statistics from Carers UK reveal that by the age of 59, 50% of women have responsibilities for older age relatives, compared to age 75 for men. This “caring sandwich” of caring for young children and then elderly relatives can have a big impact on women’s ability to work full time, their career progression, future earnings and ultimately their pensions and income in retirement.
Small increases to your pension contributions could make a big difference
One way to tackle this gap is by increasing pension contributions. By boosting your contributions, even by an extra £25 or £50 per month, you could make a big difference to your pension pot that could change your retirement. Small amounts now could make a big impact in the future, especially for your standard of living in retirement. Closing the gender pay gap also plays a part here, as the higher your pay is, the higher your pension contributions could be. These things could help to narrow the gap and make sure women have the financial freedom and independence they need in retirement.
What could an extra £50 per month do for your pension pot?
We’ve used our Pension Calculator to see what happens if a 37 year old woman were to increase her monthly pension contributions. If she had the average pension pot of £20,000, wanted to retire at the age of 67 and increased the pension contributions she made each month, she could see a difference to the projected size of her pension pot. If she stayed contributing £100 a month, her pot could be £167,000 at retirement. But if she increased that £100 a month to £150 a month, her pot could increase to £213,000 - a 28% increase. The main thing she has on her side is time - pensions are long term investments and the longer it stays invested the better.
What else can we do to close the gap?
There are lots of other things we can all do to help close the Gender Pension Gap. Employers must create policies that promote gender equality in the workplace, including flexible working, part time working and support for employees balancing caregiving responsibilities, as well as trying to close the gender pay gap.
Education is also very important in empowering women to make informed financial decisions and helping them put their financial needs first. Encourage them to talk about money and investing with friends and family - take away the taboo of talking about money. By raising awareness about the gender pension gap and the huge impact it can have on women’s futures, we can be part of the change and start closing the gap for this generation and the next.
So with International Women's Day in mind, let's all commit to closing the gender pension gap and making sure that women have the financial security they deserve in retirement. Together, we can make a big difference and hopefully create a brighter future for women across the UK.
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