Pension assets are built up throughout a person’s working life. In previous decades workers may have been more likely to own defined benefit pensions (also known as final salary schemes) but for modern workers, it’s much more likely that payments would be made to a defined contribution (DC) scheme.
A recent survey of 2,000 nationally representative adults from Close Brothers also found similar telling results.
According to their research, pension pots across the UK are rising but men have seen their average saving pot rise by eight percent over the last three years, while women’s savings have plummeted by 15 percent.
The reason for these disparities can be complicated as Maike Currie, an Investment Director at Fidelity International, explored: “Financial inequality is one of the greatest challenges we face today – not just between the genders, but also between different generations.
“As women live longer, earn less and are more likely to take career breaks or work part-time, there are currently 50 percent more women than men heading towards retirement without any private pension savings.”
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“According to figures from the Pensions Policy Institute (PPI) there are 1.2 million women in their 50s who have no private pension wealth and hence will rely on the State Pension system and their partner to provide a retirement income.”
The lack of pension savings among female retirees is worrying, especially considering that state pension payments are likely to be much lower than what private schemes can offer.
Zoe Alexander, NEST’s Director of Strategy and Corporate Affairs, also commented on PPIs findings and explained what could/needs to be done to rectify the imbalance: “We need to think carefully about the financial support and incentives that Government provides – these need to build on the success of auto enrolment and help people achieve a good standard of life when they retire.
“At Nest, we’re particularly interested in how the tax relief system could be used to provide greater support and stronger incentives to low income savers.
“Unfortunately, the findings in this report are not surprising.
“Across the board, Women face more challenges and risks when saving for retirement.
“The persistent gender pay gap, caring responsibilities, career breaks and potentially part-time working patterns lead to lower pension savings among women and continued inequality in pension outcomes between genders.
“Women are also more likely to miss out on higher employer contributions and tax relief from the government.”
Zoe concluded with practical steps that those affected could make to boost their retirement opportunities: “Besides asking for a pay rise, there are steps women can take to maximise their pension savings, which don’t involve making significant compromises in their daily lives.
“Increasing pension contributions, even if by a small amount or at least to a level matched by your employer, compounds investment gains overtime, resulting in a larger pot in retirement.
“Even a small amount a week can make a difference. Likewise, brushing up on your rights during maternity leave could pay off, as many are entitled to full employer contributions based on their salary during that time.
“Staying in your pension during maternity leave also means that you don’t miss out on National Insurance credits, which count towards your state pension.”