- Pensions, Pensions Awareness Week, Women & Money
It’s official: if you’re a woman in the UK, chances are that you’ll retire on a significantly lower pension pot*. Here's how we change that.
New data from the DWP shows that the gender pensions gap in the UK currently stands at 35%. If you’re a woman in your forties, the gap is even greater, with women in this category statistically heading for retirement with almost half the pension pot of the average man.
It’s not surprising, given the reality of life, as the impact on women of career breaks for family or caring responsibilities, part-time work and reduced hours, and the effects of menopause on a woman’s capability to work, all impact on her capacity to save towards retirement.
The situation isn’t new, and it’s one we’ve talked about for a long time. But for the first time, official research recognises that the gender pensions gap is here and it’s real. It’s a first step towards improvement, and through acknowledging the problem and its size, there is hope that change will follow to improve conditions that hold women back from saving adequately for retirement.
The report also highlights the importance that auto enrolment has played in closing the pensions gap, shrinking 7% off the starting size in the years since auto enrolment was introduced.
The report also shows that women cannot rely on the state pension alone, or a partner’s pension. It is vital that women have independent, private pension planning to achieve a comfortable and secure retirement.
There are some positive takeaways: in their thirties, women’s pension contributions overall are at their highest, and the gap is smallest at 10%. And by the time of reaching standard pension age (66), the gap has reduced again (but still significant), showing that over time there is the potential to replenish lost pension savings. It’s a start, and it shows that the continued earnings potential for women in their fifties and sixties – giving an additional c. 20 years of contributions – does have a positive impact on the final result. The question remains, though: if earnings potential, and therefore contributions, had remained at her highest, what would a woman’s pension pot have been worth over time?
From our perspective, the report emphasises more than ever the need for women to have an independent financial plan for the future, and the importance that professional financial advice plays in helping to achieve this. While this does not mean saving for the future exclusively of a spouse or partner, it does mean having a defined, fair and holistic plan for each individual’s future in retirement and the path they’ll take towards it. Social norms won’t change the imbalance overnight, but good financial planning can ensure that women’s pensions have extra boost to grow and prosper over time, and ultimately close the gap by the time they reach retirement age.
And it’s never too late to start. Speak with our IW experts to see what you can do today for your future.
Some key takeaways from the report:
Source: DWP gender pensions gap report The Gender Pensions Gap in Private Pensions – GOV.UK (www.gov.uk)