Women have £136,000 less in retirement savings compared to mean, according to a new research, as experts are urging policymakers to tackle the gender pension gap.
Women will be left with a savings pot worth £69,000 once they reach retirement age, compared to £205,000 for men, according to a new report by by NOW and the Pensions Policy Institute (PPI). To plug the gap, women would need to work and save for an extra 19 years on average.
A female saver would need to begin saving for retirement at the age of three in order to leave the workforce with the same amount of money as their male peers, the report found.
There are 1.9 million employees not enrolled into a workplace retirement plan. Some 79 per cent of workers who earn less than the automatic enrolment earnings threshold are women.
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The majority of pensioners living in poverty in the UK are women
GETTYAccording to NOW, if the age and earnings thresholds were removed from automatic enrolment, an extra 885,000 young employed women would become eligible for a workplace pension.
Currently, the earnings threshold for automatic enrolment is £10,000 with employees aged 22 or over being enrolled on a workplace scheme if they make more than this amount.
One of the reasons for the gender pension cap cited in the report is the fact women spend a decade away from the workforce on average.
This is primarily due to women being more likely to raise families with children or take on other caring responsibilities. On average, it means women lose £39,000 in pension savings.
On top of this, rising childcare costs are another barrier for working households with the average cost of a full-time nursery for a child under two coming to £14,800 annually last year. For Londoners, the average yearly nursery fees rise to £20,000 or more per child.
As a result of this, women have only saved 62 per cent of the pension wealth men have been able to accumulate. Notably, women live around seven years longer than men on average which means their retirement savings will need to go further. Two-third of British pensioners living in poverty are women with single women making up around 50 per cent of this figure.
Joanne Segars OBE, the chair of Trustees at NOW: Pensions, broke down the generational unfairness which the gender pension gap makes evident.
She explained: “It’s hard to believe that by the time a young girl starts school at four, she will already be falling behind a boy of the same age when it comes to providing for her retirement. Yet this is the reality many girls face as they leave education and enter the world of work.”
Lizzy Holliday, the director of Policy and Public Affairs, NOW: Pensions, added: “Policymakers have made important decisions in recent years which are already making a substantial difference to the way workers and their employers are providing for retirement.
“Yet, as our research shows, the scale of the gender pensions gap remains vast and will require bolder policy actions. Some of the solutions are broader than traditional pension policy.
“Childcare and gender pay gap issues must be given the urgent attention they require. But setting out the roadmap for the future of auto enrolment including tackling the difficult issue of adequacy in retirement - which affects women disproportionately given lower pension wealth- should be front and centre of next steps.”
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The 'gender pension gap' is hurting women in the UK
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Despite this discrepancy, it may be possible to boost pension contributions thanks to tax relief. It is possible to contribute up to £2,880 annually into a non-earning spouse’s pension and get a relief boost of £720 to £3,600.
As this limit was introduced in 2001, someone could have placed £65,736 into their partner’s retirement plan with the tax relief increasing this amount to £82,000.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, explained: “If you contributed the full amount to your 30-year-old partner’s pension every year, they would have a pension worth around £230,000 by the age of 68 .
“Building pension income in both names also means making the best use of tax-free personal allowances in retirement, a total of £25,140 a year (2023/24).
“If you have used up your own pension allowances this is a hugely tax efficient way of continuing to build retirement resilience by making sure both yourself and your partner are building up pensions.”
