Shining a spotlight on the Gender Pensions Gap
As we celebrate international women’s day 2024 its worth taking a moment to shine the spotlight on the gender pension gap. This is well reported, but still in evidence. Women’s private pension pots in Great Britain are typically worth 35% less than those of their male colleagues by the time they reach 55, according to a major government study into what has been termed “the great gender pension chasm”.
The study found that between 2018 and 2020 on average, for every £100 accumulated in men’s private pensions, women have just £65. Women could end up losing out on thousands of pounds of retirement income as a result of the imbalance.
There were some key reasons for this disparity, after women have children the gap between their pension and a typical man’s starts to widen. For men, having children doesn’t normally impact their pension. This is because women tend to take on the lion’s share of childcare.
Employment breaks and part time working are big drivers of the gender pension gap. Earning less and potentially missing out on employer contributions into their pension, makes it harder for women to save enough for an equal retirement.
What can be done to help this situation?
However, as we celebrate international women’s day, we felt it that it was important to re-highlight some of the key principles of building a retirement pot, which when taken together help to ensure that is fit for purpose.
The first is start saving into your pension as early as possible. It’s a great start if you can save £300 per month. The consequences of not starting early amplify as time passes, so every year that you get closer to retirement without saving into your pension will mean that you have to increase the amount you have to save monthly to reach same total value of investment. Roughly speaking this means aged 20 you would need to save 10% of your monthly income, at 30 years old 15% of your monthly income, at 40 years old 20% and so forth… so the earlier you start the less impact it will have on your monthly income, just to reach the same retirement goals.
The second is to stay invested. Time in the market gives any investments a forum in which they may increase in value, and of course if they do decrease, it will be less significant as time will be on your side to reconsider your investment strategy, and in conjunction with your Financial Adviser, build a new strategy to recover and move past any performance issues… you will have longer to build your retirement fund. If you aren’t invested at all, and keep your savings in a bank account or in cash ISA then your savings will effectively devalue over time as inflation gradually increases the cost of living.
The third is to seek professional help. Getting some financial advice is worth considering as it will allow you to have a professional review your financial situation versus the outcomes that you are seeking and model a plan that will help you achieve the right outcomes along with a level of risk that you are comfortable with. It’s worth doing this especially as you get closer to retirement so that you can mitigate any risks that you are uncomfortable with, but without compromising your goals.
If you would like to speak about any of the subjects raised here, then please do reach out to us by calling 0118 334 3500, or emailing us at [email protected]
A pension or ISA is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of fund when accessed, interest rates and legislation. Taxation advice is not regulated by the Financial Conduct Authority. Pensions cannot be accessed until age 55 (age 57 from April 2028).
This article does not constitute tax or legal advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For Guidance seek our professional advice.
Berkshire IFA Limited is regulated by the Financial Conduct Authority.
Berkshire IFA Limited 11248066 – Berkshire IFA Limited, Albany House, 14 Shute End, Wokingham, Berksh ire, RG40 1BJ. FCA Number 826120, email: [email protected], telephone: 0118 334 3500
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