Nest is calling for both employers and female employees to take “small steps” in order to ensure more equal pensions.
Its latest analysis suggests that the average women in full-time employment in the UK will have a pension that is worth £41,000 less than the average man at retirement.
This gap widens to more than £70,000 when it is based on the overall average UK wage, which includes part-time work.
Nest says that while automatic enrolment has increased pensions savings across the board, women face extra challenges when saving for retirement.
Nest has called for female employees to increase their contributions, even by a small amount.
It says putting in as little as £2.50 a week for example could ensure a pension pot is £13,600 bigger at retirement, when tax relief is taken into account.
It also urges people to make the most of any matching contribution offers provided by their employer. This could boost pension pots by up to £22,300 it says – if an employer offers to match contributions up to 5 per cent of salary. It says it would like to see more employers offer such schemes.
Nest says other steps, like ensuring employers continue to make pension payment during periods of parental leave, or encouraging women to join a pension scheme before the age of 22 (the age at which people are automatically enrolled) could also help narrow the gender pensions gap.
Nest director of strategy and corporate affairs Zoe Alexander says: “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.
“In times of financial instability, where every penny counts, pension contributions can seem like a luxury. But starting early and continuing pension contributions, if you possibly can, is the best way to futureproof your financial wellbeing in retirement.”
She adds this is why Nest has produced a new report on this gender pension gap. “We want to make sure women have the right information about what they’re entitled to from their employers and their pension scheme, and we want to help our employers support their staff.”
Phil Brown, director of policy at The People’s Pension, adds: “We welcome this latest study into the gender pensions gap by Nest as it further highlights the huge unfairness in retirement saving. Our own research into the ‘Motherhood Penalty’ shows that women who take a career break or reduce their hours in order to care for their families lose out on vital pension income.
“A future change to both the age and earnings thresholds for automatic enrolment would allow more women to save more for a workplace pension. It remains to be seen what impact coronavirus will have on the jobs market but it’s hoped that the current trend towards flexible and home working will enable more women to return to the workplace for longer and be able to save more towards a pension.”
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