The gender pay gap is once again firmly in the spotlight. While great inroads have been made towards gender equality, there’s still no denying that women tend to get paid less than men. If you factor in that many women are still the primary caregivers, taking a career break to raise children or care for an ill or elderly relative, women inevitably end up with less money to save into a pension, leaving a glaring pension gap between the two sexes.
Maike Currie, investment director for Personal Investing at Fidelity International, says:
“Research shows that a woman will end up with a lower pension than a man following a similar working life, irrespective of whether they take a career break or not, thanks to the gender pay gap.
“Women typically live longer than men, so if a longer life with less money than your male counterparts doesn’t sound like the kind of retirement you dreamed of, it’s prudent to examine each of the three typical sources of retirement income – the State Pension, a workplace pension, any other private savings and address any glaring gaps.”
State pension
The state pension is one of the most obvious forms of saving for retirement. Your income from this pot will depend on the number of national insurance (NI) contributions (or credits) you clock up over your career. Under the new single tier state pension system, you need a minimum of 10 years’ of contributions to qualify for any State Pension benefit and 35 years of NI credits to qualify for a full basic State Pension.
“It’s critical to check your NI record, particularly if you have taken a career break, to see if there are any gaps that need to be plugged,” Currie said.
Workplace pension
You don’t get much for free these days, but a workplace pension is one of those rare exceptions. The majority of employees now have a workplace pension offer that benefits from employer contributions – and in some cases, the employer will match any contributions you make.
“If your employer contributes to your pension, then they must continue to do so while you’re receiving statutory maternity pay – that’s up to 39 weeks and possibly longer if your employer offers it as part of your contract. It’s a good idea to check with your employer that your pension contributions are being paid while you’re on maternity leave, and whether that is just for the statutory 39 weeks or long,” Currie advised.
Personal savings
“Every woman should have her own savings pot – separate from her partner’s or family’s savings”, said Currie.
“If you stop working, you can still save into a pension. Even if you’re not earning you can still pay in up to £2,880 a year, which with tax relief could bump it up to a total of £3,600.
“If your husband is working, and you’re looking after the children, make sure you talk about your ISAs, and stipulate clearly in each of your wills whether you intend on leaving your ISA to your other half. This will be a sensible approach from a tax planning point of view too.”