ATTIVO
The gender pension gap: how can we close it?
Women and Pensions – Part 2
In celebration of International Women’s Day – and its theme “Give to Gain” – we’re giving expert insights into Women and Pensions; in particular, the gender pension gap. In Part 2 of our series, Nadine Perry, Associate Director at Attivo, explores the ways we can look to close the gap.
Words by Ally Oliver
The gender pension gap doesn’t appear overnight.
As shared by Nadine Perry, Associate Director at Attivo in Part 1 of this Women and Pensions series, it builds gradually through everyday decisions, life events and missed opportunities.
The good news however is that with the right planning and conversations, it’s possible to make a meaningful difference over time.
“I’m passionate about educating my clients about how to provide for their future.”
Nadine is a Chartered Financial Planner. She has worked in Financial Services for over 30 years and joined Attivo in 2024. Nadine is a Fellow of the Personal Finance Society (PFS), is part of the Chartered Insurance Institute (CII) and has been listed in VouchedFor’s Top Rated Financial Adviser Guide for six years.
Here are three ways to try and close the gender pension gap:
1. Start paying into your pension as soon as you can.
“Begin paying into your pension plan as early as possible – and take advice on where that money is being invested,” says Nadine.
“In terms of pensions, Attivo is independent, so we can search the whole market for the most appropriate funds to service your pension. We can provide some really good value funds and combine that with the hand-holding (if needed) to encourage you to top up your pension when there is cash to spare.
“With Attivo’s ongoing service, we review that fund – because what’s right one year may not be right five years down the line. We keep everything under review.”
A very simple example:*
“I always encourage clients (and my own daughters) to adopt the rule: if you get a pay rise, spend half and save half,” says Nadine.
“If you can save half of a pay rise and boost your pension with that investment, the compounding of the interest will make a dramatic difference later on. It’s a way to make your hard-earned wages work harder for you in the long term.
You’re given a pay rise of £100 a month. If you decide to use this salary without investing it, and you’re a basic rate taxpayer, this equates to around £80 in your pocket (I’ll ignore National Insurance for this example).
If you put that £100 into your pension, you’re still getting £100 – but your employer may have a scheme that matches your contributions up to a certain amount (make sure you ask about this).
Let’s say, for this example, your employer matches that £100 – making it £200 in your pension pot.
You can see how, instead of £80 in your hand, you now have £200 in your pension pot, which, if allowed to grow over time, could turn into a substantial amount of money at retirement age.
With compound interest, this sum will grow. Using an example of twenty years’ growth:
- Over ten years, if that sum grows at 5% a year = £325.
- Over twenty years, that original £200 could grow to £530
- After 30 years, it’s £864.
It’s easy to see how the original £80 can grow substantially over time. And the longer the money is invested, generally, the better.
*Figures are illustrative only.
2. Share the pension load if you become a parent.
“This is absolutely key – and something I encourage all of my younger clients to do; I tell women to keep contributing to their pension as a family; make sure that both pensions are being contributed to, even during that maternity leave,” Nadine explains. “If this doesn’t happen, it’s where the pension gap begins to widen for women.
“I realise it can be difficult if there are immediate financial pressures during those early years. You’re perhaps not earning as much, you may have taken on a sizeable mortgage and so on. It’s hard to prioritise putting money into a pension, which may be 20 or 30 years off before it’s used, but the danger is that you might regret it later on.
“What I suggest is that you think of yourselves as a joint enterprise; husband and wife. In retirement, you want your income to be as even as possible, so that one person doesn’t end up paying more tax than the other. The aim is to make sure you are both making the most of your personal tax allowances and basic rate tax bands.
“Careful budgeting can help, as well as looking at joint finances – including your partner’s pension contributions. For instance, you could look at reducing one partner’s contributions so that some of the income is diverted into the other’s pension (annual allowance and tax relief dependent).
“If you have had to stop paying into a pension, as soon as you return to work, make it a top priority to top up your pension, even if you are falling below the £10,000 limit for auto-enrolment.
“Automatic enrolment was introduced in 2012 for large companies, and by 2018, all companies were required to enrol any employee earning over £10,000 a year. It’s considered a great success, with around 75% of private-sector employees now automatically enrolled in a private pension. Remember, the more you can add to the pot in those early days, the better it will be for you in later life.
“Not all companies offer this ‘top up’, but you can usually make additional contributions through a separate private pension (Attivo can advise on this).”
An example of the long-term view:
Let’s look at two cases of a retirement pension income of £120,000 a year:
Scenario 1:
Mr and Mrs Smith each take out £60k from their pensions
Their take-home pay equals two times £48,568; a total of £97,136.
Scenario 2:
Mr Jones takes out £105,000 from his pension, and Mrs Jones takes £15,000.
Mr Jones’ take-home pay is £74,568, whilst Mrs Jones’ is £14,514.
This results in a total of £89,082 – which is £8,054 less income than Scenario 1.
3. Keep in mind the effect of divorce on your later life finances
“A cautionary tale: I have several clients who have decided to divorce in middle age. In these cases, the women were keen to keep things amicable and were happy to take the house, with the husband retaining his pension,” Nadine warns.
“The problem with this is that if a house is worth, say, £400,000 at the point of divorce, a good pension held by the husband might be worth at least £1m at retirement. This means the woman is missing out on a significant sum she is owed under the settlement.
“I’ve had several instances with female clients who took financial advice too late and have ended up significantly worse off than might have been the case.”
“People do not understand the value of pensions – and that’s one of the things Attivo is here to help with,” Nadine continues. “Talk to an Attivo Lifestyle Financial Planner, and we will work through a cash flow model with you that shows how the financial picture may look with all the variables taken into account (to keep the house, not keep the house, retain a share of pensions, or not).
“This really helps our clients to see a clear picture and make an informed decision as they move forward into a new life.”
Want to discuss your pensions and investments in more detail?
Whether you’re just starting out in your career or you’re looking to retire, we can support you at every stage of your journey. To find out more, arrange your free, no-obligation consultation with our team today.
This article is provided for information purposes only and does not constitute a personal recommendation. Any decision to invest should be made in the context of your individual circumstances and financial objectives. The value of investments and any income from them can fall as well as rise, and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change in the future. Information is based on our understanding of current taxation legislation and regulations.