Women face £100,000 pension gap - AJ Bell comment

Laura Suter
11 July 2019

·         Women face £100,000 lower pension than men

·         Career breaks, part-time work and the gender pay gap the biggest causes

·         2.6 million mothers are missing out on auto-enrolment due to childcare responsibilities

 

Laura Suter, personal finance analyst at investment platform AJ Bell, comments on the latest Pensions Policy Institute report:

“Women face a more than £100,000 pension hit in retirement, as they save less throughout their lifetime than men. We’ve long known that women’s pension savings are hit by a combination of the gender pay gap, part-time working and the increased burden of childcare costs, but these new figures lay bare the scale of the problem.

“Our own research highlighted the impact that working part-time or taking career breaks can have on a woman’s pension pot – with women missing out on £25,500 when they take two year-long career breaks, while those who take a the same two-year break and return to work part-time will miss out on more than £100,000 in their pension pot*.

“Women face a triple whammy when it comes to their pensions: first, they are not saving enough, second, they are not investing that money and so are missing out on higher returns over the long term, and third, they live longer and so on average need bigger pots than men at retirement.

“Raising awareness of the pension gap is the first step. Employers also have a role to play in highlighting the benefits of maintaining pension payments throughout maternity leave, and offering enhanced pension packages for these women.

“For women dealing with low maternity pay and high childcare costs, cancelling pension contributions may seem like a small amount of money in the short term but the compounding effect of investment returns over the long period until retirement means that the effect of stopping contributions snowballs.

“The research also found that 1.2 million women are full-time carers for children, and so aren’t eligible for auto-enrolment, while another 1.4 million working mothers earn less than the £10,000 threshold for auto-enrolment to kick in. These individuals can actively opt-in themselves, but the Government needs to fix the system to give all of them tax relief, as currently anyone contributing from their net pay will miss out.”

*Figures based on a woman earning the average UK salary with 5% pension contribution from their employer and 5% from the employee, assuming 4% a year investment growth after charges. Part-time working is based on returning four days a week, on pro-rated salary.

Laura Suter
Personal Finance Analyst
Laura Suter is personal finance analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.
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