Those working part-time face a pension gap of £184 a week, according to new analysis from the Institute for Fiscal Studies.
The average weekly retirement income for those who had been in full-time work more than 75% of their working life was £403, compared with £219 for those mostly working part time.
Commenting on the figures, AJ Bell said women are more likely to experience career gaps or working part time. AJ Bell’s own research shows a fifth (21%) of women said they worked part-time between the ages of 29 and 40, compared with 5% of men.
Working full-time also makes people more likely to have built pension savings of their own. Among those who were in full-time work at least 75% of the time, only 12% had no individual private pension wealth, compared with 25% among those working mostly part-time.
The findings reflect AJ Bell’s research on the gender pension gap, which found that women’s pension contributions start to fall behind men at the age of 28. It found that financial pressures push pension savings down the priority list, so only 8% of women prioritise their retirement savings at this age, compared to 22% of men.
Surprisingly, the findings by IFS showed that those working part-time and continuing to pay into their pension whenever they can, can actually end up worse off than those who spend most of their career out of work. On average, in retirement, part-timers have lower average incomes at £219 a week compared to £234 for those mostly out of work during their career and receiving more state benefits.
Sarah Coles, head of personal finance at AJ Bell, said: “The part-time pension gap hits women hard. Women are more likely than men to spend long periods out of work, working for themselves or working part-time, which all feeds into sizable pension shortfalls.
“What’s particularly shocking is that those who work part-time can actually end up with a lower average retirement income than those who spend most of their life not working.”
Combining couples’ income can make a particular difference to women; almost a third (29%) of women and 13% of men have no private pension wealth, but when it comes to couples, these figures fall to 18% for women and 11% for men. However, AJ Bell warned that factors such as divorce, separation or bereavement can push some women into difficulties later in life.
Coles said: “It’s not too late to close the gap, but it requires couples to work together on their pension savings and make the most of pension schemes and tax benefits. It’s particularly important for couples to have frank conversations about their finances, both now and in retirement, so they can plan their finances together as fairly as possible.”
AJ Bell said solutions also lie in policy and changes to the automatic enrolment system can play a key role. As well as lowering the minimum age for automatic enrolment, the investment platform said the Government could reduce the earnings threshold to bring lower earners into the scheme and to apply it to people’s total income rather than their income per job.
“On top of this, there needs to be an end to damaging pension speculation and a commitment to a pensions tax lock which would provide certainty for savers who are doing the right thing and saving for their futures,” Coles added.
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