The UK’s gender pay gap has been widely reported in the media in the last few years. The gender pay gap is where women are paid less than men for the same job. There has been some progress, however a 15.4%* gender pay gap still exists.
What is not so well reported is the impact of the gender pay gap on women’s retirement. Women being paid less has a direct impact on the amount that they can save for their retirement.
Women typically live longer than men so it is important to reduce the gender pension gap to make sure that women have sufficient income when they retire.
Why are women paid less than men?
As well as having to contend with the gender pay gap in many industries, there are other reasons that women often take home less pay than men. The predominant reason is that many women work part time due to childcare. This means that they earn less which has a direct impact on the amount that they can save for retirement.
Women often take career breaks when starting a family, this means that they will not be saving into their pension during this time.
Auto-enrolment and women’s pensions
Auto-enrolment means that your employer must contribute a minimum of 3% of your salary to your pension each year, however if you do not earn over £10,000 then you will not necessarily get any employer contributions.
If this is the case and they do not qualify for auto-enrolment, it would mean that women are directly responsible for saving into their pension on their own accord. Lower earnings will also mean that they have less disposable income to save for their retirement.
Compound interest and women’s pensions
Not saving into a pension when they are young will mean that women will miss out on the benefits of compound interest. Compound interest is when your savings hopefully grow in value and then you receive growth on top of the new value. This helps your pension pot to potentially grow over time. Compound interest is particularly noticeable in a pension pot where you typically have a long time period to invest for.
Steps women can take to reduce the gender pension gap
Below are a few steps women can take to reduce the gender pay gap:
- Start saving as early as possible
- Remember small contributions will add up over time
- Continue to contribute to your pension during career breaks
- Increase your personal pension contributions if you are able to
- Check your National Insurance Record to see if you qualify for the full State Pension
Take financial advice
Retirement planning and pensions can be a minefield. You may have old workplace pensions that you have forgotten about or you may not know how much you have already saved for retirement or how much you need to save in total before you can retire. At Four Wealth Management we can help women to navigate their pension options and reduce the pension gap.
Book a no-obligation meeting now
Book now or call us on 0117 973 0500
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
*ONS, ‘Gender pay gap in the UK: 2021’
