Women £106k worse off than men at retirement due to lower paid jobs and part-time work
WOMEN are £106,000 worse off than men in retirement due to the "part-time pensions penalty", according to new research.
The worrying figures from provider Now: Pensions shows that women have a pension pot of £51,100 for retirement compared to the £156,500 that men have - and that's including employer contributions.
That means women have less than a third than their male counterparts to live off in old age through no fault of their own.
These findings come the same day as women whose state pension ages were increased without any notice lost a battle at the High Court.
The problem is that while the number of women employed is currently at its highest rate since records began in 1971, at 71.4 per cent, four in ten (41 per cent) work part-time, often to balance parenting and caring roles.
It's the biggest factor causing the dramatic imbalance in pensions, and it sees pots slashed by 47 per cent compared to men by their late 50s.
What is pension auto-enrolment and how does it work?
HERE's what you need to know
- What is pension auto-enrolment? Since October 2012, employers have had to enrol their staff into workplace pension schemes as part of a government initiative to get people to save more for retirement.
- When does auto-enrolment apply? You will be automatically enrolled into your work's pension scheme if you meet the following criteria:
- You aren't already in a qualifying workplace scheme.
- You are aged at least 22.
- You are below state pension age.
- You earn more than £10,000 a year in 2019/20.
- You work in the UK. - How much do I contribute? There are minimum contributions that you and your employer must pay.
Minimum contributions are being gradually increased over time.
Your minimum contribution applies to anything you earn over £6,136 up to a limit of £50,000 (in the tax year 2019/20). This includes overtime and bonus payments.
From April 2019, a minimum of 8 per cent must be paid into the pension, with you contributing 5 per cent and the employer paying at least 3 per cent. - What if I have more than one job? For people with more than one job, each job is treated separately for automatic enrolment purposes. You can still opt out of individual schemes if you want.
Each of your employers will check whether you’re eligible to join their pension scheme. If you are, then you’ll be automatically enrolled in that employer’s workplace pension scheme.
Reducing work hours also means many women don't earn enough to meet the £10,000 a year threshold to qualify for pensions auto enrolment.
Since 2012, everyone earning above the threshold in a single job must automatically be put into a workplace pension scheme, with workers paying at least 5 per cent of their salary and 3 per cent coming from employers.
So anyone earning less than £10,000 a year automatically misses out on any pension boosting contributions.
This pensions penalty also affects the 13 per cent of men who work reduced hours, but it disproportionately hits women the hardest.
Another reason for this is that reducing hours has a greater impact on female employees' pension pots because of the gender pay gap - where women are typically paid 18 per cent less than men for the same job.
This is made worse by the fact that on average, women live almost four years longer than men meaning they have to make the cash last longer.
In order for women to have the same pension as men, they'd need to save an extra 5 to 7 per cent of their salary throughout their life time.
Top tips to boost your pension pot
DON'T know where to start? Here are some tips from Aviva on how to get going.
- Understand where you start: Before you consider your plans for tomorrow, you'll need to understand where you stand today. Look into your current pension savings and policy and research when you’ll be eligible for the state pension, and how much support you’ll receive.
- Take advantage of your workplace pension: All employers are legally required to provide a workplace pension. If you save, your employer will usually have to contribute too.
- Track down your pensions: If you've moved jobs a lot, this means you'll have several pension pots. It can be hard to keep track of them all, but the government offers to help you.
- Take advantage of online planning tools: and have tools that give you an idea of what your retirement income will be, based on how much you're saving.
- Find out if your workplace offers advice: Many employers offer sessions with financial advisers to help you plan for your future retirement.
The most damage to women's pensions happens during their 30s when many take time out to have children, but also again in their 50s when they may be reducing their hours to care for their own parents or grandchildren.
Pensions expert Joanne Segars from Now: Pensions says the "part-time pensions penalty can't afford to be ignored".
She added: "Policy and regulation around saving for retirement need to change to better reflect the changes in the workplace and society.
"Small changes to auto enrolment could make a big difference for women but to really bridge the gap, more needs to be done to help mums remain in the workforce."
The pensions provider believes this can be done by removing the auto enrolment threshold so employers can pay contributions on every pound of earnings to help get an additional 1.4million women saving for retirement.
That said, if you earn between £6,136 and £10,000 a year you can asked to be added to your workplace pension scheme, and your employer will still have to meet the auto-enrolment minimum contributions.
Earn less than this though, and your employer doesn't have to contribute.
Now: Pensions also wants the cost of childcare reviewed as it is one of the main factors stopping women from returning to work.
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We've previously warned how half a million of working parents with children under 12 may be missing out thousands of pounds worth of cash in retirement.
Missing out on just one month's worth of national insurance (NI) credits could lose you £5,000 from the total value of your state pension, according to the HMRC.
Mum-of-two Carolyn Inness warned how she nearly missed out on an £8,550 a year state pension by not claiming child benefit.
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