How women can close the pensions gap
Most women in the UK are paid less than their male counterparts – a lot less.
Companies with more than 250 employees were required to submit formal returns on what they paid to men and women in the past 12 months by the deadline of the first week of April. These revealed that more than 75% of the biggest employers in the UK pay women an average of 12% less than men. And that pay gap is widening, according to a report by CNN Business on the 5th of April.
Only 8% of the companies filing their returns pay men and women the same, while 14% pay women more then the men they employ.
The pensions gender gap
As if the gender pay gap for those still in employment was not bad enough, by the time it comes to retirement women are up to a staggering five times worse off than men, according to a story published in the Daily Mail on the 16th of April.
By the time a woman reaches the age of 65, for instance, her average pension pot is only £35,800, compared to a man of the same age who has pension savings of £179,000 – 5 times more.
The figures are reflected in findings also published last October by the Institute of Chartered Accountants in England and Wales (ICAEW), which reported that women receive around 40% less in pension income – an average of about £7,000 a year less than their male counterparts.
The inequalities in pay received by men and women start in the workplace, but then roll forward year on year, escalate and follow women throughout their working lives and into retirement.
Closing the gap
Although the pensions gap might seem inescapable, there are steps women can take to reduce or even close it:
- as with any financial planning for retirement, the earlier you start, the better – and that is likely to apply even more so for women who are looking to make up lost ground;
- of course, many women take career breaks to raise children or care for relatives, but when doing so, it is prudent to continue making pension contributions – and maximising any tax allowances on those contributions – withdrawing from the pension scheme you had risks the loss of employer’s contributions and tax allowances;
- if a woman’s contribution to running the household is regarded as a financial contribution, that means at least part of the family budget ought to be put aside as pension savings;
- when you return to work, make sure to ask about the pension arrangements offered by any new employer and don’t simply abandon any older pension scheme to which you belonged but look to incorporate it into your new plan;
- even if you are earning above the threshold to receive child benefit, be sure to register the entitlement that counts as a credit towards your State Pension;
- make sure to apply for your marriage allowance – which lets you transfer £1,250 of your annual personal tax allowance to your spouse if they earn more than you;
- if neither you nor your partner has a net income of more than £100,000, you qualify for tax-free childcare vouchers – currently worth £2,000 a year – which saves money you might use to top up your pension savings.
While the gender pay gap at work continues to separate the average earnings of men and women at work, that legacy is likely to follow any woman into retirement by way of a pensions gap. Your awareness of that gap and planning now to reduce or close it, is likely to pay dividends in the future when you eventually retire.