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What’s causing the gender pension gap?

Your employer can calculate the tax relief on your pension in a couple of different ways.

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The gender pension gap is the difference in retirement outcomes for men and women where the income women have to live on when they retire is on average lower than their male counterparts.

What’s driving the gap?

For a lot of people, the amount they save into a pension is usually a percentage of their salary. The gender pay gap, where women are on average paid less than men, means that less is being paid into women’s pensions.

From our own membership data, we can see that the average salaries of female members are 23% lower than male members and, the average contribution women pay into their pension is also lower at 9.9%, compared to 10.5% for men.

Although much progress has been made towards equality in recent decades, typically it’s still women who more often take time off or work part-time to look after children or sick or elderly parents too. This impacts their pension savings because state pension entitlements are largely based on the number of years spent working and paying National Insurance, or the amount of National Insurance credits claimed during time off for parenting or caring.

Whilst engagement with pensions is low in general, our research shows engagement to be lowest amongst females, revealing that two-thirds of women in their 50s don’t know how much is saved in their pension.

Women also live longer than men on average. The Office for National Statistics reports an average life expectancy of 79 years for men and 82.9 years for women. So, not only do women have less money in retirement, but they might also need to make their savings last longer too.

Closing the gap

We encourage everyone to be proactive in planning for their retirement, but to help close the gender pension gap research shows that this is currently of particular importance to women. We’ve included some pointers below:

  • Review your pension – take a look at how much you’ve saved so far and how much your savings might be worth by the time you’re ready to retire. Will it be enough? Try our interactive video quiz and pension savings tool to get an idea.
  • How long could your retirement last? - when you enrol in the TPT pension scheme, your target retirement age is set to a default age, usually 65, but you might want to retire later than that. Try the Office for National Statistics life expectancy calculator to work out your likely life expectancy.
  • Take advantage of tax relief – a great benefit of paying into a workplace pension is that you get tax relief on the money you pay in. If you’re a basic rate taxpayer, this means that every £10 you pay into your pension only costs you £8. It’s also worth checking how much your employer will pay into your pension – some will increase their contributions to your pension if you pay in more.
  • Check your National Insurance record – you’ll need a total of 35 years of National Insurance contributions or credits to be eligible for the full state pension when you retire. If it looks like you might not achieve this, it’s worth looking into whether you can make top-up National Insurance Contributions. You can check your State Pension forecast here.
  • Plan ahead - if you’re planning to take maternity leave, check with your employer what happens to your pension contributions and if it’s an option to keep paying in during your time off. Or, if you’re thinking about reducing your working hours to help balance family life, it’s worth considering if it would be better for your partner to work part-time depending on who gets the higher pension contributions.
  • If you’re impacted by divorce - for a lot of people who go through a divorce, the focus tends to be on the value of the home. However, it’s important not to overlook pension savings as they can be one of the most valuable assets. Read our article and consider getting expert advice.

Source: Achieving gender equality in pensions – Prospect’s 2021 report on the gender pension gap

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