The gender pension gap starts as early as age 28, as career breaks see women’s contributions slip, new research from AJ Bell has revealed.
According to the ONS’ most recent data, the average woman in the UK has her first child at 29 and more women start to work part-time or take career breaks around this age too.
Between the ages of 29 and 40, a fifth (21%) of women say they work part-time, compared with 5% of men.
However, the investment platform warned that when women take breaks in their careers, no longer benefiting from auto-enrolment, the pension gap starts to appear quickly. Over the long term, HM Revenue & Customs figures estimate that adult women hold 48% less in their pension than men.
Charlene Young, senior pensions and savings expert at AJ Bell, said: “There is no hiding from the gender pension gap. But looking at how and when it starts could provide valuable insight into the best ways of working towards closing it.
“It’s impossible to ignore salary differences. Government data tells us that women working full time are paid, on average, 6.9% less than men. That’s a sizeable difference in take home pay, but it also means that women are paying less into their pension each month, which has a snowballing effect on their pension pot over time.
“As many women take career breaks to have children or to care for family, cracks start appearing from missed or lower contributions in the key years when pension growth is so important. These cracks manifest as a chunky gender pension gap when it comes to retirement.”
AJ Bell said the financial pressures of having children means that many women might even stop contributing to their pension altogether during longer periods of maternity leave.
However, the priority gap between men and women when it comes to their pension changes when women reach their 40s. According to the firm’s research, women begin to prioritise their pension equally to men at age 41. Almost one in three (29%) women aged 41 to 55 name their pension as a financial priority, compared with 30% of men.
At age 41, if £100 is added to a pension each month, it equates to an extra pot worth £42,500 after 20 years. This increases to over £66,700 if the payments continue until age 67.
To address the gender pension gap, AJ Bell has called on pension providers to ensure pension communications reflect diverse life experiences and goals rather than a one-size fits all approach, and said providers should focus on the incentives to save into pensions, highlighting the benefits of pension saving and the long-term impact of compound growth.
In addition, AJ Bell said policy makers should work to close the gender pay gap and change the framework for automatic enrolment, noting that lowering the earnings trigger and assessing income across multiple jobs would help more women benefit from automatic enrolment.
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