How women can boost their pension savings

Elizabeth Anderson

by , Personal Finance Journalist and Editor

Times Money, Metro and i paper

12 June 2023 /  

Five women standing side by side looking at phones and smiling.

According to the DWP, the official gender pension gap’s estimated to be 35% for private pensions. This means women have a retirement fund worth 35% less than men at age 55, when you can begin withdrawing private pensions. PensionBee’s customer base shows a similar story, with a 38% gap.

Women have around £100,000 in private pension savings aged 55 compared with £150,000 for men, separate figures from PensionBee show.

Below we look at how women (or savers generally) can boost their pension savings to have more in retirement.

Max out your company’s scheme

If you’re employed by a company, check their pension policy. You could be turning down free money by not taking full advantage of their pension scheme.

Under UK Auto Enrolment laws, employers have to contribute a minimum of 3% of your qualifying annual salary into a pension. But many employers will be more generous than this. Some may offer to match your contributions up to a certain level or even double your contributions. For example, they may offer to pay in 12% if you contribute 6%.

Of course, this will mean sacrificing more of your take-home pay to a pension. But once tax relief’s taken into account, the net cost to you will likely be lower than you realise. Use PensionBee’s pension tax relief calculator to work out the actual cost to you.

Those who are self-employed won’t get employer contributions but will still benefit from tax relief.

Maintain pension payments during maternity leave

Having a baby’s usually the tipping point at which the gender pension gap begins to widen as women are more likely than men to take time out of paid work to care for children. For women in their 30s, the gender pension gap’s 10% but significantly widens to 33% by the time they hit their early 40s.

Make sure you don’t opt out of your employer’s pension scheme while on parental leave, as employers should continue paying the same contributions as before you went on leave.

The contributions from yourself may be lower as the amount you pay into your pension will be based on your parental leave pay – which may be less than your typical working salary.

It’s up to you whether you want to pay more to keep your contributions at your typical rate, but at least your employer contributions will remain the same. If you’re going back to work at the same pay, it may only be a few months where your personal contributions are lower.

We explain more here about what happens to your pension during maternity leave.

Consider going back to work when parental leave ends

The high cost of childcare’s the reason why many parents choose to take a career break or leave the workforce altogether after having a baby. However, the government announced in the Spring Budget their commitment to give more free childcare. This means parents can access 15 hours of free childcare a week from the time a child is nine months from September 2024, rising to 30 hours the following year. This should make it more financially worthwhile for parents to return to work before a child starts school.

Ask for a pay rise

An obvious way to get more into your pension’s to earn more money. Your employer will have to pay more into your pension, and your own contributions will also increase.

Women are less likely to ask for a pay rise than their male counterparts. Around 60% of women have never asked for a pay rise compared to 48% of men, according to YouGov data. Jobs websites such as Indeed and Total Jobs have various guides and scripts on how to ask for a pay rise.

Claim National Insurance credits

To get the State Pension, you’ll need to have amassed enough National Insurance contributions. If you’re not earning enough to pay National Insurance, you can still claim National Insurance credits for looking after a child under the age of 12 or for other care responsibilities.

To ensure you’re getting National Insurance credits for childcare, the stay-at-home parent should claim Child Benefit. This may have to be paid back if your partner’s income’s above £50,000. If you don’t want to claim Child Benefit because your household income’s too high, you can specify on the government form that you don’t want to be paid Child Benefit but want to protect your State Pension.

Take more investment risk

Various studies have shown that women tend to take less investment risks than their male counterparts. Despite their hesitancy, when women choose to invest, they often make better investment decisions than their male counterparts, with men making 50% more mistakes than women when it comes to investing. It seems that confidence, not competency, is preventing women from investing in their future.

Younger savers should be able to take greater investment risk, as there’s more time for money to recover in the event of a stock market downturn.

Consider combining old pots

You may have worked for several employers and accumulated a number of pensions. It may be a good idea to consider bringing them into one place, so you can clearly see your total savings and what that could give you in retirement.

A company such as PensionBee can help you combine your old pension pots.

Elizabeth Anderson is a Personal Finance Journalist and Editor (Daily Mail, Times Money, Metro and i paper).

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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