Is the pension gender gap affecting you?

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A lot has been made of the gender pay gap, but what’s not so well known is how this can affect women in retirement

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Pensioner Income Series statistics from the Department for Work and Pensions show that the gap between men and women’s retirement income is continuing to grow.

According to the figures, in 2006/07 the average retired single woman had a gross income of £294 per week, while her male counterpart had £325 – a difference of £31 per week. However, by 2016/17, the gap had nearly tripled to £85, with the average single woman on £316 per week, and the average man on £401 per week.

Why is this happening?

There are several reasons why this is happening. For a start, women are more likely to be in part-time employment than men, so they’re saving less into a pension. In addition, they also tend to take more career breaks than men, to look after children and family members for example, which will impact how much they’re able to save. Taking time out of the workplace also means women are less likely to build up the 35 qualifying years of National Insurance Contributions (NICs) needed to qualify for a full State Pension.

What can be done about it?

While the growing gender retirement income gap is concerning, there are things that can be done to address it. Probably the best known is auto-enrolment, which began in 2012. This made it a legal requirement for employers to automatically enrol eligible members of staff into a workplace pension scheme. So far the initiative has been a success, with over 10 million people having been enrolled into a scheme and saving for their future.

Over time this will help more women to build up retirement savings, but it’s worth noting that 2019/20 minimum contribution rates are 8%. This is made up of 5% from the employee and 3% from the employer. While saving at this level is a good start, it’s not enough to generate a decent level of income in retirement – so if you can afford it, you should think about saving more.

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The State Pension

As it currently stands, the full State Pension is worth around £8,700 per year (2019/20) and is a valuable building block towards a sustainable retirement income. However, to qualify for the full State Pension, you need to have built up 35 years of NICs or credits – this can be difficult if you’ve taken significant time out of work.

However, what’s not so well known is that as long as you’re registered to receive child benefit and have a child under the age of 12, then parents who’ve spent time out of the workforce caring for children can still claim NI credits for that time. You can find more information on GOV.UK.

It’s worth noting that if you’ve spent time out of the workforce as a carer, or you’re looking after a grandchild, then there are also processes by which you can claim NI credits.

If after this you still haven’t built up the necessary 35 years needed to qualify for a full State Pension, then you could buy NI credits to top up your record. Visit the Pensions Advisory Service to find out more, and Royal London’s guide on Topping up your State Pension also offers information about this.

Another important way for women to support pension savings is to continue to contribute to a workplace pension while on maternity leave. If you qualify for Statutory Maternity Pay and continue to pay into a workplace pension then you continue to benefit from your employer’s contribution, as well as gain NICs. However, maternity arrangements vary between employers so it’s worth checking in advance.

It’s clear that there are still significant challenges when it comes to tackling the gender retirement gap. However, as auto-enrolment progresses, we should see more women saving into a pension and, if they can be encouraged to increase their contributions, things will start to improve.

Table showing the average income for single men and women in retirement. This image is an infographic and has alternative text available if you are using a screen reader.

Table displaying the average income for single men and women in retirement, split into years, gender, gross income, real earnings and average occupational pension income per week.

  • First column shows the gross income per week, split between 2016-2017 and 2006-2007 and covers data for men and women
    • Top of first column shows the gross income per week between 2016 and 2017
      • Gross income for men is £401
      • Gross income for women is £316
      • Gap of £85
    • Bottom of first column shows the gross incom per week between 2006 and 2007
      • Gross income for men is £325
      • Gross income for women is £294
      • Gap of £31
    • The gap has grown by £54 per week
  • Second column shows Real earnings per week, split between 2016-2017 and 2006-2007 and covers data for men and women
    • Top of second column shows real earnings per week between 2016 and 2017
      • Real earnings for men is £37
      • Real earnings for women is £19
      • Gap of £18
    • Bottom of second column shows real earnings per week between 2006 and 2007
      • Real earnings for men is £17 
      • Real earnings for women is £21
      • Gap of £4
    • The gap has grown by £22 per week
  • Third column shows the average occupational pension income per week, split between 2016-2017 and 2006-2007 and covers data for men and women
    • Top of third column shows the average occupational pension income per week between 2016 and 2017
      • The average occupational pension income for men is £125
      • The average occupational pension income for women is £81
      • Difference of £44
    • Bottom of third column shows the average occupational pension income per week between 2006 and 2007
      • The average occupational pension income for men is £83
      • The average occupational pension income for women is £58
      • Difference of £25
    • The gap has grown by £19 per week

Source: Pensioner Income Series, Department for Work and Pensions

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