We all know there's a gender pay gap, but what about the gender pensions gap later in life? According to new data, just 39% of women have planned ahead for their retirement finances, compared to 52% of men.
What's more, the research has indicated that women across the country lack faith in the government's pension plan, as we navigate a national cost-of-living crisis. According to data from a survey of 2,000 UK adults conducted by independent pensions advisory firm My Pension Expert, only 22% of women think the government has been successful in supporting their pension plans, compared to 28% of men. In part, this is due to a lack of confidence in policymakers: 27% of men back Chancellor Jeremy Hunt, while only 20% of women do.
Women also, on average, lack knowledge around their pension funds, the report has shown: only 46% of women know how much money is in their pension, compared to 54% of men. Meanwhile, while 64% of men claim that they understand the impact that high inflation and rising interest rates will have on their pensions, while only 49% of women say the same (we do wonder if this is self-reported, as women are more likely to play down their knowledge around finance and numbers – but still, that's what the data says).
Amid Pension Awareness Week – which began on Monday 11 September 2023 – Lily Megson, Policy Director at My Pension Expert, has commented on the need for greater advice and education around pensions, targeted at women, in order to help close the gap – which is yet another example of gender inequality.
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She says: “Time and time again the gender pension gap continues to rear its ugly head. Simply put, women are less prepared for retirement in terms of the amount they have saved as well as their confidence and knowledge in pension planning.
“Government policy can play a key role in combatting this. Improving access to education and advice to bridge the gender pension gap, to name a few examples, would certainly be steps in the right direction. But our research also highlights a more complex issue at play: women are more likely to be disillusioned by the government’s handling of the economy and the support – or lack of – they are providing to people who want to plan their long-term financial futures."
For some of us, the thought of retirement might be a little scary – or something so far away it's not worth thinking about – but it is something we should all be considering in order to secure a happy and worry-free future, particularly if we're anticipating we may be affected by the gender pension gap. So what can be done, in order to ensure the retirement you've dreamt of having someday, spent blissfully travelling, picking up a new hobby, perhaps a bit of gardening, telly-watching – or maybe doing absolutely, wonderfully, nothing?
Because of course, in order to actually enjoy your retirement – to pay for all that travelling and gardening gear and the giant TV you’ll be watching series 87 of The Great British Bake-Off on – you’re going to need a decent income. And research has shown that a great number of us might not be putting enough into our pension pots now to support us when we do retire. In fact, 21% of people living in the UK have no savings towards their pension at all.
Consolidating your pensions can make it easier to keep track of them.
Then you factor in the gender pensions gap, which means that statistically women have 40.3% less pension savings than men. Research from earlier this year showed that four out of five employers in the UK paid their male employees more than the women. This stems from a range of factors, from men inhabiting more of the “top” job roles at companies across the UK, to women statistically being more likely to reduce their hours or give up work altogether to take care of children than their male partners. Whatever the reason, this pay gap equates to around £7,500 a year. That’s a huge difference.
Fortunately, there are things you can do now to set yourself up for the future and ensure you have the funds to not only survive your retirement, but thrive. And Alexia and Margot de Broglie, sisters and co-founders of Juno – an app and educational platform designed to teach users how to “how to make more, spend less, and feel financially confident to reach your goals” – have the lowdown on where to start.
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What actually is a pension?
First of all, let’s take things back to basics. A pension is, by definition, “a long-term savings plan with tax relief,” say the sisters. “Pensions are typically invested in stocks and shares, with the hope that over the course of your working life, the value of your pension will go up.”
“In a society where women tend to outlive male partners and are more likely to run out of retirement savings than men, saving for a pension should be a priority,” they add.
80% of companies pay men more than women, according to new research.
How much do you actually have to save?
Working out an exact figure is difficult – as recent years have shown, the cost of living, mortgage and interest rates can fluctuate dramatically, so all you can do is try to prepare yourself as much as possible.
According to Alexia and Margot, “It’s helpful to have a ballpark figure of annual income you’re likely to need from your pension. Research has found that your annual spend once you retire is closely linked to your level of income before retirement.”
So, their suggestion: multiply your expected figure by 25 to reach an estimate. So, for example, if you think you’ll need £50,000 a year, that will require a pension pot of £1,250,000.
That’s a huge figure to imagine saving. You can see if you’re on track by forecasting the pension you might receive in the future, using calculators such as this one by MoneyHelper, or this by Standard Life.
But no matter what figure comes up on those calculators, don’t worry – you’re not expected to reach your 25x estimate alone. This is where the different kinds of pension come into play…
Different types of pension
Your State Pension is what you receive from the government when you reach retirement age and is paid directly into your bank account monthly. The age in question may change – it currently stands at 66, but it’s set to rise to 67 between 2026 and 2028.
You will need to have made a total of 35 years of national insurance payments to qualify for a full State Pension – if you won’t make that, you may be able to pay to supplement the missing time period. It’s best to check your national insurance record here to find out more.
The maximum amount you can expect for your State Pension currently stands at £185.15 per week, or £9,628 a year. So, as you can see, this might not be enough for you to enjoy all those holidays you were planning. “That’s why it’s important to think of your State Pension as a starting point for your retirement savings, rather than the be all and end all,” say Alexia and Margot.
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If you are employed by a company (rather than owning your own business or being self-employed), then you should be entitled to a workplace pension, should you meet the criteria. The legal requirement is that all UK employees earning more than £10,000 a year over the age of 22, but under State Pension age, will be provided with a pension from their employer (in addition to the State Pension they will receive once they reach the required age).
“For the April 2022 to 2023 tax year, the equivalent of 8% of your salary must be paid into an auto-enrolment pension,” the de Broglies sisters say. Your employer may also contribute to this pension, too.
To make sure you get the most out of your pension, the key is to stay auto-enrolled in your company’s scheme. Any contribution made by your employer is, essentially, “free” money. So while it might be annoying seeing money deducted from your payslip each month, you’ll benefit from it in the long run.
Also, if you’re able to, contributing more to your workplace pension (often called a “salary sacrifice”) is a great idea. “The money comes out of your pre-tax salary and goes straight into your pension, reducing your national insurance bill,” the sisters explain.
This is sometimes also known as a private pension, which is something you can set up to save additional money for your future. It’s something that is often used by those who are self-employed, and also those who want to build up a larger retirement fund than what their workplace and State Pension will provide.
How to consolidate your pensions into one pot
If you’ve worked for more than one company since you turned 22, it’s likely that you have more than one workplace pension – and it can be easy to lose track. It’s estimated that around £19.4bn of pension savings go unclaimed.
So, the simple solution to this is to track down all your old pensions and pool them into one account.
“When you leave an employer, your pension stays invested in the pension fund that your company is part of. You should still receive a pension statement each year with your details. If you move address it can sometimes mean your old pension providers lose track of you, so keep this in mind,” explain the de Broglies.
The HR teams at your previous jobs should be the first point of call to track down these pensions. But, if you’re having trouble finding any of your previous workplace pensions, there is a government service that can help – the Pension Tracing Service tracks down the contact details for all of your pension providers.
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What else can you do to save for the future?
Pensions aside, managing your personal finances is key to being in a good financial position come retirement. That’s where apps like Juno come in – founders Alexia and Margot created the app to help people track their savings and get the most out of their money.
Once you’re in a good financial position, the sisters also suggest you could consider investing, with caution of course. “A pension isn’t the only way to save for your retirement,” they say. “If you’ve already used your pension allowances, or if you want more flexibility than a traditional pension, investing could be right for you and could offer your chances of high returns.”
Plus, they add: “Studies have found that women actually tend to outperform men when it comes to investing. That’s one way to beat the gap!”
No matter which path you choose, options are out there to help you take control of your financial future. And it’s clear that the earlier you start, the better off you’ll be. So here’s to doing retirement your way.
