Kate Marshall 31 August 2018
On average women live longer than men. But when it comes to retirement, they’re still losing out due to the gender pay gap.
Even if young women paid into their pension schemes in line with the government’s auto-enrolment contributions, a recent study shows they’d still end up with a pot just over 11% less than their male colleagues.
Fidelity found that men aged between 25 and 34 working full-time will, on average, have accumulated a pot worth £142,836 when they reach 68. But the average pot for full-time working women is £126,874.
One reason for this gap is because some women miss out on pension payments if they take time off work at the beginning or end of their careers. And even for the years they’re working, women are more likely to earn less than men.
Sarah Coles, Personal Finance Analyst at Hargreaves Lansdown, says: “These figures are a reflection of the hurdles women have to overcome in order to build their retirement savings.
As well as this, given the average woman will spend around four years longer in retirement than the average man, we actually need to build up bigger savings pots than men. It means pensions savings should be a priority, even during our most expensive times of life.”
Thanks to the introduction of auto-enrolment, the percentage of women employed in the private sector with a workplace pension has nearly doubled since 2012. But there’s still a big difference between the size of men and women’s pensions and this won’t change unless women take action.
Close the gap
Savvy investors can close the gender pension gap. Depending on your age, if you increase your pension contributions by a small amount you could close the gap more easily than you might think.
For example, if a woman aged 29 increased their pension contributions by an additional 1% of their salary and retired at 68, this gap could be closed. Based on the average salary for women, this would work out at just £35 per month.
Sarah Coles adds, “The good news is you don’t have to move mountains to make a big difference. If women could pay a small amount more a month into their pensions throughout their working life, they can close the gap with men, and secure a more comfortable retirement.”
Beat the gap
Although there’s a clear difference between men and women’s pension pots, when it comes to investing, women may actually have the upper hand.
At HL, over the three years to July 2018, female clients, on average, saw the value of their investments grow 0.78% faster than their male counterparts each year.
Source: HL 31/07/2018
If that performance was repeated every year for 30 years women would, on average, end up with around 20% more than men. If they topped up their pension and invested wisely, they could not only close the pension gap, but beat it.
Remember, there are no guarantees that past performance can be repeated. Investments can fall as well as rise in value so you could get back less than you put in.
How do I contribute more to my pension?
You can talk to your employer about increasing your contributions. Some employers may offer to match your contribution, which could make it even more worthwhile.
Alternatively, you can open a SIPP (Self Invested Personal Pension) and set up a regular direct debit or make one-off contributions whenever you can. In the HL SIPP, you can choose from a wide range of options and have control of your investments.
Remember, you can’t access money in your pension until age 55 (57 from 2028).
If you already have an HL SIPP, you can simply log into your account to set up or increase a direct debit.
This article is not personal advice or a recommendation to invest. If you’re not sure if an investment is right for your circumstances you should seek expert advice.