On the go: Opting in to a pension scheme at 18, understanding if the employer matches the worker’s contributions, and adding as little as an extra £2.50 a week to the pension pot are all ways of closing the gender pensions gap, according to a report from Nest.
Modelling carried out by Nest shows women working full-time have a pension worth, on average, £41,000 less than their male counterparts by the time they come to retire, while the figure from the overall average wage, which includes part-time work, is more than £70,000.
The disparity is chiefly attributable to structural issues, according to the report, like the fact that women disproportionately work in low-paid or part-time positions. Time off for maternity leave also plays a significant role.
Nest’s modelling suggested that a combination of actions by both individuals and their employers can shrink the gap significantly. Adding an extra £2.50 a week could grow a pension pot by £13,600 by the time of retirement.
The report also recommended that people find out whether their employer matches their contributions and, if so, to pay in as much as they can afford. Employers should help by clearly advertising and reminding employees of these benefits.
If the employer matches contributions up to 5 per cent of salary, savers could end up with an additional £22,300 without having to pay in anything extra, Nest’s report stated.
And a further £1,700 could be added by steady employer contributions over two 12-month maternity breaks. Many women are entitled to pension contributions at their usual salary rate rather than statutory pay, and where this is the case the report calls on employers to ensure it is well advertised.
Zoe Alexander, Nest’s director of strategy and corporate affairs, noted: “Women face systemic challenges in saving as much as men do for their retirement — these begin at the start of their working life and have a ripple effect throughout their life as they juggle conflicting priorities, lasting well into retirement.
“It looks like the ongoing impact of Covid-19 could also disproportionately affect women and may further undermine their pension savings potential.”
She continued: “In times of financial instability, where every penny counts, pension contributions can seem like a luxury. But starting early and continuing contributions, if you possibly can, is the best way to future-proof your financial wellbeing in retirement.”
