Bridging the pensions gap

On average, women would have to work 19 years longer than men just to match their pension savings. So, what can be done to bridge the gap if you’re a woman thinking about what your money will look like in retirement?

It won’t come as much of a surprise to working women that their wages fall behind those of men (about 14% less to be precise), and that means their pensions aren’t as big either. A 2022 report found a huge 40.5% gap in pension earnings between men and women. That translates to an annual difference in pension income of around £7,100! But there are ways to try to get ahead and help boost your pension’s prospects.

Starting your pension early and making regular contributions means your money is invested for longer and has more time to grow. But life can sometimes get in the way. In particular, women are more likely on average to take time away from work to have children or care for a relative.

There’s also the consideration that women are likely to be paid less than men in general, meaning there’s less income – and less money overall – going into a pension.

So how can you get over these obstacles, take control and strengthen your pension? Here are seven ideas to consider:

1. Give your workplace pension a workout

Boost your workplace pension by increasing your contributions if you can. Some employers will match those additional contributions, up to a set level. If you start the ball rolling earlier, you’ll benefit from tax relief on more of your money – and your pension will have more time to grow.

2. Keep up your pension during maternity leave

Generally, paying into your workplace pension if you’re on maternity leave will mean your employer continues paying their share into it too. Even though you may be paying in less (because it’s likely based on a percentage of your maternity pay), your employer will generally contribute based on your full pre-maternity full salary. For any unpaid maternity leave, you may be eligible for National Insurance credits (Opens in new window) so it’s worth seeing if you qualify.

3. Open a personal pension

A personal pension (like a self-invested personal pension or SIPP) can give you more control and flexibility around how much you put in and where your money is invested, which could bring better returns in the long run. A SIPP might be an option if you are self-employed. Get some help from a financial adviser to find the best one to suit you. It’s not tied to where you work, so if you move jobs your pension is not affected. Maybe you’ve got an income from a side hustle – any extra money can go a long way, but do consider how this income could affect your tax position.

4. Make the most of being married

Did you know you’re generally able to pay up to £60,000 a year from your earned income into your pension, tax-free? If you’ve used up this allowance you could consider making additional contributions to your spouse’s or civil partner’s pension (assuming they haven’t reached their maximum limit) and pay into their pension.

5. Keep tabs on your National Insurance contribution record

Track your State Pension by checking your National Insurance contribution (NIC) record online at www.gov.uk/check-national-insurance-record (Opens in new window). You’ll see if you qualify to receive the full State Pension amount when you retire (you'll generally need to have a total of 35 qualifying years of National Insurance contributions – but this can depend on a number of factors). There may be options to make some voluntary contributions to help fill any gaps.

6. Delay your State Pension

People are living (and working) for longer, and some of us aim to work beyond the State Pension age. So, if you’re in no hurry you could defer your State Pension. By doing so, it'll actually go up by 1% every nine weeks. That means if you’re entitled to £203.85 a week and deferred your pension by a year, you would get an extra £11.82 a week.

7. Get advice if you’re going through a divorce or legal separation

Pensions during a divorce can become extra tricky, so it’s important to get financial and legal advice at the time to see if you’re entitled to any of your partner’s pension. Getting some help early on could boost your retirement income in the years to come. Equally, your partner may be entitled to some of your pension, so seeking out independent advice is crucial.

• What is pension consolidation?
• How to separate joint debt after a divorce
• Ways to save for your retirement when your budget is tight

Disclaimer: The Hub is intended as a knowledge portal to provide information on a range of topics, including financial products and lifestyle management. These articles are not financial advice. Articles may reference products and services that Chase UK does not currently offer. Tax treatment and other allowances/figures depend on individual circumstances and may be subject to change in the future.