Women in their late forties are facing a staggering £57,000 pension shortfall compared to men, new calculations from interactive investor show.
This comes following new data released by the DWP that demonstrates the gender pension wealth gap between men and women has hit 35 percent, while the gap between those eligible for auto-enrolment rests at 32 percent.
Contrastingly, the total pension contribution gap between men and women in 2021 was 17 percent at £52billion for women, compared with £62.6billion for men.
While pension wealth for the average woman increased from £50,000 to £94,000 by the minimum private pension age between 2008 to 2020, the figures don’t quite correspond with those for men.
According to interactive investor, pension wealth for the average man rose from £85,000 to £145,000 by the minimum private pension age during the same period.
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Its calculations show that if women’s pension wealth were to increase at the same rate as men aged between 35 to 49, women’s pots would reach £80,960 between age 45 to 49 – compared to £46,000 in reality.
Experts at interactive investor attribute this £57,960 average shortfall for women in their 40s to a “motherhood penalty”, as childcare costs and the gender pay gap kick in.
Alice Guy, head of pensions and savings at interactive investor, commented: “Women have a pension shortfall of £57,000 by the time they reach their late 40s as the motherhood penalty kicks in, compared to if their pension wealth increased at the same rate as men.
“Women have lower pension wealth than men at every stage of the journey, but a small gap often becomes an unbridgeable chasm for women in their 40s as a modest eight percent gender pension gap increases to 40 percent for women aged between 40 to 44 and 48 percent for women aged 50 to 54.”
Mr Guy said that the motherhood penalty becomes apparent as women often “bear the brunt” of childcare and household chores” and are more likely to work part-time in their 40s.
She continued: “If women have children, the odds are stacked against them as some of the highest childcare costs in Europe combined with an increasing gender pay gap, make it harder for them to build pension wealth.”
However, while saving can add additional pressure to pockets, Ms Guy said even “small extra amounts” paid into a pension add up over time.
Ms Guy said: “If you’re older and your kids have flown the nest, then it can make sense to up your pension contributions. Contributing an extra £200 per month from the age of 50 could add up to £64,104 by the time you reach 67, assuming five percent investment growth.”
Due to pension contributions being tax-free, that £200 per month will cost basic rate taxpayers £160 after tax.
Ms Guy continued: “If one partner earns significantly more than the other and has a much bigger pension pot, it’s worth considering paying extra into the pension of the lower-earning partner. When you come to draw your pension, it’s not tax efficient for one partner to earn a lot more than the other and you could end up with a much bigger tax bill as a couple.
“Non-earners can pay up to £3,600 into their pension each year, including tax relief and earners can pay into up to 100 percent of their earnings, capped at £60,000 per tax year.”
