Gender inequality and retirement planning
As pay and pensions are interlinked, the gender pay gap of 15.5% in 2020 [1] can have a big impact on the retirement plans for women. The gender pay gap is not the same as equal pay where men and women are paid the same when doing the exact same work and has been a requirement since 1970. The gender pay gap is the average difference between hourly wages for men and women and can be caused by things such as having fewer women in senior and high earning roles or more women in part time roles.
Many events throughout a woman’s life can contribute to the lack of sufficient retirement savings due to earnings gaps such as maternity leave, reducing hours and taking lower paid work to balance careers, lack of career progression opportunities and juggling family responsibilities. Lower earners have less disposable income available to contribute to pensions which is leaving women with an average pension fund at 65 at 1/5th of that of men.[2]
During the recent pandemic, women are also more likely to take on the unpaid care duties in the household such as home-schooling children and looking after the elderly and the sick. A report by McKinsey Global Institute [3] found that as women are more likely to be employed in roles that are more likely to be affected by job losses due to the pandemic such as accommodation and food services, retail and arts and recreation. This in turn can also adversely affect their retirement planning.
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HOW CAN RECEIVING ADVICE OR GUIDANCE HELP?
Setting retirement planning targets as early as possible and reviewing them regularly can help identify and bridge any gaps. There are some ideas and tips below that may help:
Join your employer’s workplace pension scheme as soon as you can if one is available. As long as you meet certain criteria, if you pay, your employer also pays.
If you are self-employed you can set up an individual pension plan.
Check for previous pensions and get a full picture of where you are heading to and what your options are at retirement by using a forecasting tool such as our Retirement Options Planner.
Think about what your life in retirement will look like, will you want to travel, will you need to account for care costs later in life.
Speak to a financial adviser – many offer an initial consultation to assess your needs and to check if advice is right for you.
If going on maternity leave, try and remain in your workplace pension throughout.
35 years’ NI credits are required for a full state pension.
Make sure you claim state pension credits in relation to child benefit, job seeker’s allowances or carer’s allowances if you are eligible.
You may also be able to top up by making voluntary contributions.
If you can afford to, save as much as you can to your pension while earning and paying tax at higher rates to maximise tax relief and help reduce the cost to you.
If you are married, and one of you is a non-taxpayer and the other earns less than £50k, check if you can claim the Marriage Allowance.
If you have a student loan, you may wish to consider delaying repayment if you have not reached the threshold income. Paying pension contributions via salary sacrifice can also reduce your threshold income.
If part of a couple, make sure you maximise your own pension savings and don’t rely purely on your partner’s savings.
Review your death benefit nominations now and in the future if your material circumstances change.
Consider making a will.
Consider using your ISA tax-free savings allowances.
If you do have debts, try to pay off the ones with the highest interest rates first.
Sources
[1] Gender pay gap in the UK - Office for National Statistics (ons.gov.uk)
[2] Womens-pensions-life-journey-23-10-c6.pdf (insuringwomensfutures.co.uk)
[3] COVID-19 and gender equality: Countering the regressive effects | McKinsey
Other sources – LEBC Pension Gender Gap Guide – Apr 2019, Independent Equal Pay Day Nov 20th 2020