Women are more likely than men to have gaps in their pension contributions and to save less in a pension due to lower-paid or part-time working. Women also live longer than men -- on average by 3.7 years -- so need their pension savings to last longer.
While automatic enrolment has brought about a huge increase in pension saving in the UK, women still end up with significantly less in their pension pots than men when they retire, according to workplace pension company Nest.
New modelling by Nest suggests the average woman working full-time in the UK could have a pension pot £41,000 smaller than the average man's. Based on the overall average UK wage, which includes part-time work, this gap widens to as much as £72,500.
So, what can women do to increase their pension saving and how can employers help them?
1. Start saving early
Firstly, start saving as soon as possible. Auto enrolment applies from the age of 22, but most workers are entitled to opt into a workplace pension from the age of 18 and benefit from both employer contributions and tax relief, effectively doubling their contributions.
Saving into a workplace pension from 18, rather than waiting until you're auto-enrolled four years later, could add as much as £12,500 to your final pension pot.
2. Save a little bit more
Consider increasing your contributions, even if you can only manage a small amount more. It can make a big difference down the line: saving as little as £2.50 a week extra could grow your pot by £13,600 by the time you retire, including tax relief.
3. Employer matching contributions
Find out whether your employer will match your pension contributions and if so, pay in as much as you can afford. Understanding what's on offer from your employer could make thousands of pounds worth of difference and employers can help by clearly advertising these benefits and regularly reminding their workers of them, Nest explains.
If your employer matches your contributions up to 5% of your salary, which is the minimum you'll be paying in including tax relief if you've been auto enrolled, you could have an additional £22,300 in your pot by the time you retire without having to pay in anything extra yourself.
4. Full employer contributions during maternity leave
During parental leave, many workers are entitled to full employer pension contributions based on their usual salary rather than statutory pay. Employers can help by clearly advertising these rights to workers.
Based on the average salary, steady employer contributions during two 12-month maternity breaks could mean an extra £1,700 in women's final pension pots.
"Women face systemic challenges in saving as much as men do for their retirement -- these begin at the start of their working life and have a ripple effect throughout their life as they juggle conflicting priorities, lasting well into retirement," said Nest's director of strategy and corporate affairs, Zoe Alexander.
"It looks like the ongoing impact of Covid-19 could also disproportionately affect women and may further undermine their pension savings potential.
"In times of financial instability, where every penny counts, pension contributions can seem like a luxury. But starting early and continuing pension contributions, if you possibly can, is the best way to futureproof your financial wellbeing in retirement."
At Fidelius, our strategic consulting services can help you make sure that you have the right pension schemes, best structure and most effective scheme governance and communication processes for your particular workforce and specific business objectives.
Contact us today to find out more!