How women can max out their pensions and close 35% gender gap

The first official measurement of the gender pension gap has revealed a gaping hole in women’s savings.

Women reach age 55 and have a third less savings for private pensions than men, according to figures released this week by the Department of Work and Pensions.

The data reflected much earlier research and the main causes are already known: women are paid less than men, and they spend part of their lives on vital but unpaid care work.

It shouldn’t be just for women to try to solve these societal problems. Employers who continue to pay women less than men for the same work or keep them in lower paying jobs are certainly at fault.

And expectations that women would typically be the ones sacrificing their careers for family responsibilities — including those tasked with caring for aging parents — should also be questioned.

But for individual women, it’s still worth trying to put your own finances in the best possible position for later life.

Below, we’ve got tips from money experts on maximizing your retirement — and it’s advice that men worried about a deficit could benefit from, too.

1. Start early in life

“The sooner you start depositing your pension, the more you can take advantage of the beneficial effects of compound interest as it builds over time,” says Chris Eastwood, CEO of pension provider Penfold.

‘It doesn’t matter if you can pay little. Make a monthly payment arrangement for your pension now and if your income rises in the future, you can increase it.’

2. Continue contributing

“Unexpected living expenses and events seem to come out of nowhere and if you’re not careful, they can throw your financial goals completely off balance,” says Eastwood.

“The most important thing is that you don’t let this discourage you. It’s totally fine if your contributions are lower than in previous years. If this happens, try not to compare and criticize yourself. Just let it go and consider making a bigger contribution next year.

Alice Guy, Head of Retirements and Savings at Interactive Investor, says: ‘When you’re struggling to pay the bills it can seem like an insurmountable hurdle to put your head up and save for the long term, but it’s worth it. remembering that even small extra amounts add up to your pension over time.

3. Catching up after career breaks

“The reason most women interrupt their careers is to take maternity leave or work less to care for the kids,” says Eastwood.

This affects women disproportionately and is one of the reasons why they have smaller retirement pots at the end of their careers.

“Maybe not only are you dealing with a pay gap, but your long-term professional prospects could also suffer. An income gap can result in a reduction in your retirement benefits, including both state and private/work pensions,” continues Eastwood.

Interactive Investor calculates that the pension wealth of women aged 45-49 would be £80,960 if it continued to rise at the same rate as that of men aged 35-49 – but in reality it only reaches £46,000.

“This means women will pay an average of £57,960 maternity fines by the age of 40 as childcare costs and the gender pay gap kick in,” says Guy.

There are ways to make sure you don’t miss a thing while on maternity (or paternity) leave.

Read our explanation of how to maximize pension contributions during your maternity leave or how to increase them when you return to work.

4. Make decisions with your partner

‘If one partner earns significantly more than the other and has a much larger pension pot, it is worth considering making extra contributions to the pension of the partner earning the least,’ says Guy.

‘When you come to withdraw your pension, it is not tax-advantaged for one partner to earn much more than for the other and as a couple you may be faced with a much higher tax bill.’

‘Non-earners can contribute up to £3,600 to their pension each year, including tax relief, and earners can contribute up to 100 per cent of their income, capped at £60,000 per tax year.’

Couples tackling retirement savings together may be much better off when they retire, though there are some issues, particularly tax-related, that are explained here.

5. Increase contributions later

‘When you are older and your children have flown out of the nest, it may make sense to increase your pension contributions,’ says Guy.

An additional contribution of £200 per month from age 50 could add up to £64,104 by the time you turn 67, assuming an investment growth rate of 5 per cent.

“And that £200 a month costs the base rate taxpayer just £160 after tax, as pension contributions are tax-free.”

How to arrange your pension if you are afraid that it will fall short

1) If you’re worried about saving enough, research your existing pensions. Broadly speaking, you should ask schematics the following questions.

– The current fund value.

– The current transfer value – as there may be a penalty for moving.

– Whether the pension is in a final salary or defined contribution scheme. Fixed contribution pensions take contributions from both employer and employee and invest them to provide a pot of money at retirement.

Unless you work in the public sector, they have now largely replaced the more generous gilded ones defined benefit – average or final salary – pensions, which provide a guaranteed income after retirement until your death.

Defined premium pensions are stingier and savers bear the investment risk, rather than employers.

– Whether there are guarantees, for example a guaranteed annuity, and whether you would lose them if you moved the fund.

– The pension forecast at retirement age. You can use a retirement calculator to see if you’ll have enough – these are widely available online.

2) You need to add the predicted figures to what you expect to get in state pension benefits, which is currently £203.85 a week or about £10,600 a year if you qualify for the full new rate. Request an AOW forecast here.

3) If you’re tempted to pool your old pensions, read our guide first to make sure you don’t get fined.

4) If you have lost track of old pots, the The government’s free pension tracking service is here.

Be careful when searching for the Pension Tracing Service online, as many companies with similar names will appear in the results.

These also offer to look for your pension, but try to charge or whip you for other services, and may be fraudulent.