Women face £106,000 ‘part-time pensions penalty’ in retirement

Women could be over £100,000 worse off than men by the time they reach retirement as they seek to balance caring responsibilities by working part time, new research has found.

The report, Facing an unequal future – closing the gender pensions gap, based on research by the Pensions Policy Institute (PPI) and published by Now Pensions, found that part-time working women could face a 47 per cent reduction to their pension wealth by the time they reach their late 50s.

According to the report, women typically have £51,000 in their pension by the time they reach their 60s, compared to an average man’s £156,500 pension pot.

Working part-time has a bigger impact than the gender pay gap, despite women earning on average 18 per cent less than men, reducing their pension savings by 28 per cent.

Now Pensions interim chair of trustees, Joanne Segars, said: “Pension saving can be difficult, especially for women. Not only are women typically paid less, but they are much more likely to work part-time or take time out of the workforce to care for children or elderly relatives. This time out of the workforce has a huge impact and the part-time pensions penalty can’t afford to be ignored.”

Furthermore, women on average live 3.7 years longer than men, meaning that they would need to save 5-7 per cent more by retirement.

“Policy and regulation around saving for retirement need to change to better reflect the changes in the workplace and society. Small changes to auto enrolment could make a big difference for women but to really to bridge the gap more needs to be done to help mums remain in the workforce,” Segars added.

As a result of the findings, Now Pensions has devised a five-point plan for fairer pensions, including removing £10,000 auto-enrolment (AE) trigger, AE contributions on every pound of earnings, family carer’s top up through state pension credits, considering pension funds in divorce settlements and more action on the availability and cost of childcare.

The research also found that three in 10 part-time workers don’t believe part-time hours will affect their pension pots, despite the £10,000 threshold, while 41 per cent of part-time workers accept they will have saved less.

Fawcett Society CEO, Sam Smethers, said: “Women face a double jeopardy. They both carry more risk throughout their lives and are less able to take action to protect themselves.

“The shocking pensions gap that women experience is a result of a lifetime of income and workplace inequality. If we introduced a carer’s top up for pension contributions and lowered the threshold so that more low paid women in part-time work could benefit, that could make a real difference.”

Commenting on the findings, The Peoples Pension director of policy, Gregg McClymont, said: Four in ten mums who worked part-time, told us they would increase their part time hours if childcare was cheaper.

"If we’re going to tackle pensions inequality, not only are changes to auto-enrolment required but better provision of affordable childcare is a must to enable those mums that want to keep working or work more hours, to be able to.”

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