There has been significant progress in recent years around equality for women. However, unfortunately even in 2023, women still face multiple financial gaps that have a significant impact on their financial situation in the long-term.
3 things to consider when investing for a child:
Despite the campaigning that you may have seen pushing for equality, for full time employees, women in the UK were paid 7.9% less than the average man in April 2021*. This means that they are receiving a lower salary so they
are able to save less than men. It also has a direct impact on the amount they save into their pensions. The lower the salary, the less the employer has to pay into the employees pension according to auto-enrolment legislation. This can make a significant difference to women’s final pension values by the time they retire.
In fact, the gender pension gap is also a very real problem. Research shows that women’s pensions are half the size of men’s pensions on average**.
The Motherhood Penalty
It is common for women to adjust their careers to accommodate family life whereas the man typically continues to work full time. Many women do not return to work at all after having a child or if they do choose to do so then it is common for women to return to work on a part time basis.
However, this means that many women do not earn over £10,000 and therefore are not eligible for a workplace pension at all. This means that they are responsible for saving into a private pension themselves. However as their earnings are now much lower than when they worked full time it is unlikely that pension savings will be a priority which further increases the gender pension gap.
Life Span
Women typically live longer than men. This means that women have to support themselves for longer after they retire which again is where having less pension savings than men is an issue.
Tips for women to save more for their future
If you’ve taken a career gap in the last six years, you could think about paying voluntary national insurance contributions to increase the amount of State Pension you’ll receive when you retire. If even after paying voluntary contributions you don’t meet the 35 minimum qualifying years to receive the full amount, you could look at saving into a pension yourself to help with any shortfalls.
You could also consider increasing your pension contributions into either a private pension or your workplace pension. It is worth checking how much your workplace will match your contribution. Auto-enrolment means employers must pay in 3% of your salary to your pension, however many companies will increase this amount if you also pay in more yourself.
*Gov, UK, 2021, ‘Gender pay gap data’
** Legal & General analysis of based LGIM’s proprietary data on c4.5 million defined contribution members as at 1 April 2022 but does not take into account any other pension provision the customers may have elsewhere.
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