Closing the gender pension gap

We’ve all heard of the gender pay gap, but how about the gender pension gap? Unfortunately, the reality is that women often save less for retirement compared to men.

It’s important to be aware of the factors that contribute, so you can take proactive steps to help secure your financial future.

One of the primary reasons women save less for retirement is the decision to start a family. While raising children is a deeply rewarding experience, it can have long-term financial implications. Here are some of the reasons why and what you can do.

Maternity Leave and Reduced Contributions

Many women choose to extend their maternity leave beyond the contracted period offered by their employer. If this extended leave is unpaid, it can lead to a temporary halt or drop in pension contributions. Moreover, employers are not required to contribute to pensions beyond 39 weeks of maternity leave.

The High Cost of Childcare

Childcare expenses are another major hurdle. In some cases, the cost of childcare can make it financially impractical for women to return to work full-time, or even at all. Working fewer hours or taking a career break means lower earnings and, subsequently, lower pension contributions. Over time, this can significantly impact the amount saved for retirement.

Career and Earning Power Challenges

Earning power can be affected as well. Many women report lower earnings upon returning to work and diminished promotion prospects, even if they return to full-time roles.

So, what can you do?

While these challenges are significant, the first step is becoming aware of them and their potential impact. This will enable you to proactively seek ways to close the retirement gap over time and improve your future financial security. Here are some ways to do this:

• Plan Early: The sooner you start saving for retirement, the more time and potential your money has to grow. Even small contributions can make a big difference over the years.
• Maximise Employer Contributions: If your employer offers a pension match, take full advantage of it. 
• Consider Alternative Investments: Look beyond traditional pension plans and explore investment options such as stocks, bonds, or property to build additional retirement savings.
• Stay Informed: Make sure you fully understand your employer’s maternity leave and pension policies so you can plan accordingly.
• Explore Flexible Work Options: If returning to work full-time is not feasible, look for flexible work arrangements that allow you to continue contributing to your pension.

By Leighanne Metcalfe

Financial Adviser

HJP Chartered Financial Planners

To find out more about Leighanne, click here

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