Women 'face £72,500 pension gender gap by retirement' says research
WOMEN earning an average UK salary could end up more than £70,000 worse off than men at retirement, new figures suggest.
The average woman working full-time in the UK could have a £41,000 gender pension gap at retirement, according to modelling by workplace pension scheme Nest, but when part-time work is included, the gap widens to around £72,500.
Nest calculated that a male pension saver working full-time could have £178,871 saved by retirement, while a woman could amass £137,863.
The calculation, based on average UK wages, made several assumptions, including about investment growth and that someone would start saving aged 22 and retire at 68.
When part-time work was taken into account, the modelling found a male worker could potentially end up with £161,999 while a woman could save £89,449.
Many women spend much of their lives working part-time to juggle caring responsibilities for children and other family members.
Covid-19 has had a significant impact on people's financial situation and their outlook.
When surveyed in June, women saving with Nest were more likely than men to say they were only just about managing to make ends meet financially - at 34 per cent versus 25 per cent.
Nest said there are some small steps pension savers can take to help their pots grow.
It suggested that workers should not wait until they are 22 to be automatically enrolled into a workplace pension. Workers may find they can opt into a workplace pension from 18 and benefit from employer contributions and tax relief, it said.
It calculated that saving from 18 rather than waiting to be auto-enrolled at 22 could add as much as £12,500 to someone's final pension pot.
Even adding as little as £2.50 a week extra could potentially grow it by £13,600 by retirement, Nest said.
It can also pay to know where you stand with your pension. During parental leave, many workers are entitled to full employer pension contributions based on their usual salary rather than statutory pay, Nest added.
It said that based on the average salary, steady employer contributions during two 12-month maternity breaks could mean an extra £1,700 in women's pots.
Nest's director of strategy and corporate affairs, Zoe Alexander, said: "Women face systemic challenges in saving as much as men do for their retirement - these begin at the start of their working life and have a ripple effect throughout their life as they juggle conflicting priorities, lasting well into retirement.
"It looks like the ongoing impact of Covid-19 could also disproportionately affect women and may further undermine their pension savings potential.
"In times of financial instability, where every penny counts, pension contributions can seem like a luxury. But starting early and continuing pension contributions, if you possibly can, is the best way to futureproof your financial wellbeing in retirement."
Phil Brown, director of policy at The People's Pension, said: "Our own research into the 'motherhood penalty' shows that women who take a career break or reduce their hours in order to care for their families lose out on vital pension income.
"A future change to both the age and earnings thresholds for automatic enrolment would allow more women to save more for a workplace pension.
"It remains to be seen what impact coronavirus will have on the jobs market but it's hoped that the current trend towards flexible and home-working will enable more women to return to the workplace for longer and be able to save more towards a pension."
Helen Morrissey, pensions specialist at Royal London, said: "While women have benefited from auto-enrolment, this changes once they leave the workforce either to have children or carry out other caring duties.
"A mix of part-time work and time out of the workforce blows a hole in their retirement planning that is difficult to recover from and the cost of childcare can deter many women from resuming pension contributions at a later date.
"There is no one solution to this problem but Government must look at how we can keep women in pensions for longer. The issue of providing good quality childcare at a decent cost is vital to this, as well as more information around maternity leave and its impact on pensions."