Data from the Centre for Economics, Business and Research has revealed the pandemic has increased the gender pensions gap, despite women giving a bigger proportion of their income to pensions over recent years.
According to Michelle Crowley, wealth planner at Succession Wealth, there were several reasons for this.
She said: "One is that women are more likely to take a career break or work part-time, especially when they have young children.
"In fact, 75 per cent of part-time workers are women. Women are also more likely to work in low-income positions too, and in industries affected most acutely by the pandemic."
There are benefits to saving in a pension if you have long-term goals.CrowleyCrowley pointed to the average annual difference in median wage between men and women in full-time work, which stands at £6,100.
She said: "When looking at these differences, the focus is often on the short-term financial impact. However, the long term, and what it means for retirement, is just as important."
Here are Crowley's five tips to help women get on track financially:
1. Start saving as soon as you can
Setting retirement savings goals can seem challenging. However, recognising that you’ll be saving this over your entire career can make it seem less daunting, and the reality is that the earlier you start to build your pot, the better position you’ll be in.
It is, of course, never too late to start building a pension, but starting early will give you longer to benefit from investment returns and compound interest, boosting your fund further.
Despite this, 17 per cent of women aren’t saving anything at all. It is important to understand that even small but regular contributions can add up in the long term.
2. Review your pension arrangements
Under auto-enrolment, most workers will now be automatically enrolled in their workplace pension scheme.
It’s worth taking some time to understand what you’re contributing, what your employer is contributing, and how pension investments are helping these contributions to grow.
Setting up your own contributions can help close the gap and keep retirement plans on track.Your pension provider will also provide a pension forecast, showing an estimate of what your pension is expected to be worth at retirement. It can help you see if you’re on track.
You may also have pensions from previous employers too, and you should review these alongside your current one. In some cases, it makes sense to consolidate pensions into a single pot, making your savings easier to manage.
3. Speak to your employer
Speaking to your employer can help you understand the benefits on offer.
For example, if you’re not eligible for auto-enrolment, your employer may still offer you a Workplace Pension scheme if you speak to them.
There may also be other options for improving your long-term financial security, such as a salary sacrifice scheme that will increase pension contributions.
Reducing earnings via salary sacrifice can impact entitlement to income related employer and government benefits and may not be appropriate for some individuals.
4. Continue contributing even when you’re not enrolled in a workplace pension
You don’t have to be part of a workplace pension scheme to continue adding to a pension.
Whether you’re taking a career break or aren’t eligible for auto-enrolment, setting up your own contributions can help close the gap and keep retirement plans on track.
You can choose to open a personal pension or contribute to existing schemes, such as old workplace pensions.
Even small, regular additions to your pensions can add up over the long term and improve your retirement prospects. You can also choose to add a lump sum to pensions.
5. Weigh up the pros and cons of diverting savings into a pension
When we think of financial security, it’s often the short-term we focus on.
However, there are benefits to saving in a pension if you have long-term goals.
You will receive tax relief on your pension contributions, meaning an extra 20 per cent will be added if you’re a basic rate taxpayer, and more if you’re a higher or additional rate taxpayer.
It gives your savings an instant uplift. As pension contributions are invested, they also aim to deliver long-term returns.
If you’re in a position to do so, diverting money from your usual savings into your pension can make sense.
However, you need to keep in mind that your pension money will not be accessible until you’re 55, rising to 57 in 2028. As a result, you need to be in a secure financial position and have an emergency fund in place before doing so.
simoney.kyriakou@ft.com
