Women’s pensions have long been a topic of concern, with the gender pension gap remaining a pressing financial issue in the UK. On average, women’s pension pots are 40 per cent smaller than men’s by the time they reach retirement age. However, there are steps that women can take to empower themselves and close this gap, as highlighted by Camilla Esmund.
Pensions Awareness Week recently shed light on the importance of examining one’s pension savings and planning for retirement. Despite advancements in workplace equality, women in the UK are still facing significant financial challenges when it comes to retirement security. The persistent gender pay gap, career breaks for caregiving or children, and longer life expectancies all contribute to the disparity in pension savings between men and women. The impact of the ‘motherhood penalty’ further exacerbates the situation, as women often make sacrifices that hinder their ability to build long-term wealth.
Government data reveals a staggering 48 per cent pension gap between men and women by the age of 45, with men having an average of £88,000 in their pension compared to £46,000 for women. This gap is projected to widen in the coming years due to factors such as investment compounding and lower average pay for women. While pension saving may not always be a top priority amid immediate financial needs, small contributions over time can have a significant impact on one’s retirement savings. For instance, contributing an extra £200 per month from age 50 could result in £73,704 by age 67, with tax benefits for basic-rate taxpayers.
Despite the introduction of auto-enrolment over a decade ago, which has increased pension participation, there is still a notable lack of financial literacy and engagement when it comes to pensions. Enhancing financial capability among investors, both male and female, is crucial in building financial resilience and maximizing limited resources. Women have shown to be excellent investors, with data indicating that they often outperform men over longer timeframes.
To address the gender pension gap and take control of their financial futures, women can take proactive steps. Obtaining a state pension forecast to ensure a full National Insurance record is essential, especially for those who have taken time out of the workforce for caregiving responsibilities. While the state pension provides a foundation, additional savings are necessary for a comfortable retirement. Topping up workplace pensions, setting up personal pensions, or opening a Self-Invested Personal Pension (SIPP) are viable options to boost retirement savings.
Consolidating lost or misplaced pensions through the government’s tracing service or contacting previous employers can streamline retirement planning and reduce fees. Merging multiple pensions into a single plan within a SIPP can simplify management and potentially increase savings. By taking control of their pensions and making informed investment decisions, women can bridge the gender pension gap and secure their financial futures.
In conclusion, addressing the gender pension gap requires proactive steps on both individual and policy levels. Empowering women to take control of their pensions and make informed financial decisions is crucial in closing the disparity in retirement savings. By leveraging available resources, seeking financial guidance, and maximizing savings opportunities, women can work towards a more secure and comfortable retirement.