Bridging the pensions gap

4 min | 25 April 2022

The Chase team

On average, women have to work over 14 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 15% less to be precise), and that means their pensions aren’t as big either. A 2020 report found a huge 40.3% gap in pension earnings between men and women. That translates to an annual difference in pension income of around £7,500! But there are ways to try to get ahead and help boost your pension’s prospects.

Pensions unpacked

Whether it’s a workplace or personal scheme, pensions have one thing in common – they usually pay the most in your retirement years if you start early and keep making regular contributions. 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 fact that women are likely to be paid less than men in general, meaning there’s less income – and less 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. Maybe you’ve got an income from a side hustle – any extra can go a long way. 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 pre-maternity full salary. For any unpaid maternity leave you may be eligible for National Insurance credits, so it’s worth seeing if you qualify.

3. Open a personal pension

A personal pension, such as a self-invested personal pension (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 a good 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.

4. Make the most of being married

Did you know you’re generally able to pay up to £40,000 a year into your pension, tax free? If you’ve used up this allowance, you’re allowed to use your spouses or civil partner’s (assuming they haven’t reached their maximum limit) and pay into theirs.

5. Keep tabs on your National Insurance contribution record

Track your state pension by checking your National Insurance contribution 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 will actually go up by 1% every nine weeks. That means if you’re entitled to £185.15 a week and deferred your pension by a year, you would get an extra £10.70 a week. If this is not an option you could consider downsizing your home to generate some extra equity or even selling your car if you don’t use it very much.

7. Get advice if you’re going through a 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 years to come.

Disclaimer: This article is for information only and does not constitute financial advice. Tax treatment and other allowances/figures depend on individual circumstances and may be subject to change in the future.

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