NEW! Our Hero’s Journey tool can help you with your next step towards financial freedom - click here to try now.
Advertiser Disclosure

How to close the gender pensions gap

How to close the gender pensions gap
Image source: Getty Images

As we celebrate International Women’s Day, it is important to highlight the continued gender pensions gap. New research from Scottish Widows shows that the average woman in her twenties is on course to have £100,000 less in her pension pot than a man of the same age.

So why is this the case? And is there anything that can be done about it?

Why is there a gender pensions gap?

While big strides have been taken towards gender equality, the disparity in retirement income is still one of the biggest issues facing women today.

The reality is that there are several things in play that mean that women fall behind men when it comes to saving for their pensions. Lower average earnings, part-time work or taking time out of paid employment to care for family all have a huge impact.

Any reduction in hours or a career break can have a significant impact on a woman’s final pension pot.

Meanwhile, the pandemic has exasperated the gender pensions gap further, with women bearing the brunt of homeschooling or furlough.

According to Scottish Widows, 36% of women under the age of 25 work in the hardest-hit sectors, such as hospitality and retail, and almost half have been furloughed.

Plot your path towards financial freedom with our Hero’s Journey tool!

MyWalletHero is here to help you learn about taking control of your money, whether that’s paying off debt, working towards a short-term money goal, or investing for your future.

This tool can help you understand the next steps on your journey – simply choose a goal that best describes your current interests to get started.

Is there a way to close the gap?

The gender pensions gap is quite significant. As it stands, on average, a woman would have to work an estimated 37 extra years to make up the shortfall.

So is there a way forward that means that the disparity isn’t so vast? Scottish Widows says that if a woman was to increase her pension contributions by 5% at the start of her career, the gap would be closed by £94,000.

Awareness and education is also key. A lack of engagement amongst female savers is one of the biggest hurdles to overcome. According to the numbers, 21% of women under 25 admit they have not started thinking about retirement.

Starting contributions early and maintaining them throughout your working life is only going to help build a decent retirement income.

How do you set up a pension?

Most people in employment will have the opportunity to enrol in a workplace pension. This is usually the most straightforward way to set up a pension. Employers tend to make a contribution as well.

However, women sometimes miss the threshold for auto-enrolment. Additionally, many women take on more flexible job roles that do not come with workplace pensions. Some take career breaks to take care of the family and therefore do not have a pension to save into.

If this sounds familiar, then there is the option to set up a self-invested personal pension (SIPP). Here, you can choose to manage your investments yourself, or use an authorised investment manager to make decisions for you.

Investing platforms such as Wealthsimple or Wealthify allow you to set up a SIPP online. Typically, all you will need to do is select your risk appetite and your level of contributions. Just remember to take a look at the fee structure to establish how much you will be paying for your pension to be managed by a professional.

It’s important to remember that any type of investing carries risk. But the earlier you start a pension, the longer you have to build a retirement income for the future.

Are you making these 3 common investing mistakes?

These all-too-common investing errors can cause you to miss out on the long-term wealth-building power that shares can hold….

To help you side-step these pitfalls, and move forward on your path to wealth-building, we’ve created a free report, “The 3 Worst Mistakes New Investors Make”.

Just enter you best email below for instant access to your free copy.

By checking this box and submitting your email address, you agree to MyWalletHero sending you emails with money tips, along with details of products and services that we think might interest you. You can unsubscribe from future emails at any time. You also consent to us processing your personal data in line with our privacy policy, and our cookie statement. For more information, including how we collect, store, and handle personal data, please read our Privacy Statement and Terms & Conditions.

Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.