It has been documented that there’s a gap between the earnings of men and women in the workplace. This gap has been estimated at around 18% by recent studies, with women earning significantly less after they start a family.
But the disparity doesn’t only exist in wages – research into over 1,400 pensions has shown that women have smaller pension pots than men.
So what does the research show about men and women’s saving habits?
Women’s Savings Decrease as They Get Older
When women reach their 40s, their savings take a huge hit. At age 45, women have over 22% less in their pensions than men of the same age. But this gap only begins to grow once women reach their mid-30s.
In younger age groups, pension savings are relatively equal between men and women. However, this starts to change in the age group of 36 – 40, when men begin showing a pension 14% bigger than a woman of the same age.
But that’s not all
The gender retirement gap widens even further between the ages of 41 – 45 when the average man has 16% more in his pension fund than the average woman. This can translate into as much as £6,000 less in women’s pension pots.
What Causes Gender Pay Gap?
Research by the IFS1 shows that there is a disparity between the wages earned by men and women – this can rise to 30% a decade after a woman starts a family. The average woman has her first child around 28 years old, and it’s after this point that the pension gap begins to grow.
But why is this?
The pension gap affects retirement saving2 and can potentially leave women with a poorer quality of life after they stop working, compared to their male counterparts.
It seems that starting a family is the tipping point for the pension gap. The pension divergence begins when women are in their 30s; around the time, most women have their first child.
This creates a dilemma for many women: Should they take time off work to start a family, even though this may affect their current income and long-term savings?
Time for Change
This research shows a worrying trend for female savers and should serve as an encouragement for women to take a keen interest in their pensions, now.
Many women are already earning less than men, which means they have less disposable income to save towards a pension. There is also more chance they will be excluded from benefits, leaving them more at risk of financial insecurity during their retirement.
A Few Common Questions
The gender gap is a disparity in pay between men and women. Women often earn less than their male counterparts because of childcare responsibilities, lack of education and less access to leadership roles or job opportunities.
The pension gap speaks to the difference in savings accumulated between men and women for their retirement. Research has shown that men can save more than women for their pension funds, which could leave women under financial strain later in life.
Claiming for Child Benefit is essential in ensuring you receive your National Insurance credits. Your National Insurance record affects your State Pension. You need 35 years of payments to be able to claim the full State Pension once you retire.
A pension fund will ensure you have a form of income after your retirement. These savings could be used to supplement your income in the case of unforeseen costs. This form of savings has added benefits, such as tax relief and employer contributions.
Until the pay and pension gap are closed, women are most likely to pay the price of childcare. This leaves them at risk of small retirement savings and economic dependence later in life.