Chapters Financial News

Statistics released by the Department for Work and Pensions (DWP) in early June 2023 illustrate that although the successful introduction of pensions automatic enrolment a decade or so ago has helped more women to save into a pension, the UK still faces a significant gender gap between men and women in private pension values.

The gender pensions gap measures the difference in the amount of private pension value held by men and women at or around normal minimum pension age, which is currently age 55.

DWP figures show that, based on the most recent data (2018-2020) the gap between male and female private pension wealth is around 35% for all women at age 55, although there is a smaller gap of 32% among people who are auto-enrolled.

The DWP notes that the gap of 35% has narrowed from 42% in 2006-2008, and this is in significant part due to automatic enrolment bringing millions of women into pension participation for the first time.

However, the wealth gap persists, particularly for women aged between 45 and 49, who have only around half the pension of men in the same age group. The gap is smallest for those in their thirties (10%).

Further details may be found here: https://www.gov.uk/government/statistics/gender-pensions-gap-in-private-pensions

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The pension provider Royal London cites working part-time, caring responsibilities, and menopause as significant contributors to the gender pensions gap.

It is at first glance encouraging that the gender pensions gap is smallest for those who are younger – this does indicate that more parity between men and women in their pension savings is on its way for younger generations. However, this may be cold comfort as research from the Institute for Fiscal Studies suggests that nine out of 10 workers is not saving enough for a comfortable retirement. The era of traditional final salary pensions has largely come to an end, aside from in the public sector, and most private sector workers are saving into defined contribution arrangements. Furthermore, many are contributing the minimum required under auto-enrolment rules, which is unlikely to be enough to provide a decent pension.

Whether you are male or female, it's really important to review how much you save into your pension, particularly whilst you're young. Pensions require two things – money and time – and even if you haven't got much to put away, investment growth over time might help to boost your pension pot.

In addition, as we often mention in our blogs, do check your State Pension entitlement to ensure that this is on track. It's easy to do either through your Government Gateway or via a paper form: https://www.gov.uk/check-state-pension . For those who have taken career breaks to raise children, it may be possible to top up missed years, if you did not receive Child Benefit and the associated National Insurance credits for a child under 12. Before you top up, though, make sure this will add value – talk to an appropriate adviser to ensure that this will boost your pension and offer value in your own circumstances.

We know that state pension ages are rising, and likely to rise further in the future. Therefore, the need to make your own pension provision is not going to diminish any time soon.

Keith Churchouse FPFS
Director
CFP Chartered FCSI
Chartered Financial Planner

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