4 clever ways women can boost their retirement savings

International Women’s Day, which fell on 8 March, is an annual opportunity to celebrate the achievements of women and raise awareness of issues such as gender equality.

However, the most recent government data shows that the gender pension gap in private pensions remains at 35%. In simple terms, around the normal minimum pension age (55, rising to 57 from 6 April 2028), men have, on average, 35% more pension savings than women.

Furthermore, research published by the Guardian suggests that women would have to work for an additional 19 years to close this gender pension gap.

Fortunately, there are steps you can take to improve your financial future. Read on to learn four clever ways women can boost their retirement savings.

1. Start saving as early as possible

It might seem necessary to put off saving for retirement if you’re faced with seemingly more pressing financial commitments, such as supporting your family.

However, delaying saving for later life could result in a divergence between your retirement expectations and reality.

Indeed, research by HSBC UK has revealed that more than half of women (52%) expect to struggle financially when they retire.

Instead, you could help to ensure you have enough for the retirement lifestyle you want by starting to save as early as possible.

By giving your savings plenty of time to grow, they could benefit from the effect of compounding – earning returns on your returns. While compounding may seem to have little impact on your pension funds at first, over many years, it can significantly boost your retirement savings.

Additionally, women typically live longer than men. According to the Office for National Statistics life expectancy calculator, a woman aged 50 in the UK can expect to live three years longer than a man of the same age. So, a woman’s retirement income may need to stretch over a longer period than their male counterpart’s.

Fortunately, by factoring your life expectancy into your retirement planning and giving your savings as much time as possible to grow, you could potentially build a pension pot that lasts your retirement, however long it is.

2. Continue making pension and National Insurance contributions during career breaks

Taking a career break could affect your salary and consequently reduce your pension contributions. According to the Trades Union Congress, women are seven times more likely than men to take time out of work to care for children or other family members.

So, if you or your partner can continue making contributions to your pension during any career breaks you take, this could help you build the savings you need for a comfortable retirement.

Indeed, pensions can be a tax-efficient way to save as the government offers generous tax relief on any contributions you make up to your Annual Allowance. For most people, this is ÂŁ60,000, or 100% of your earnings, whichever is lower (2023/24). Your allowance may be lower if your income exceeds certain thresholds, or you have already flexibly accessed your pension.

The level of tax relief you’ll receive is based on your income. So, for a basic-rate taxpayer, the government top-up is 20%, meaning that a £1,000 contribution only “costs” you £800. Higher- and additional-rate taxpayers can claim an additional 20% or 25% relief respectively, through self-assessment.

But remember, you or your partner can’t pay more into your pension than your earnings (or £60,000) tax-efficiently in 2023/24. So, if your career break spans a full tax year and you have no income during this time, your contributions will be limited to £3,600 gross (2023/24).

In addition to contributing to your pension, you might want to consider making voluntary National Insurance contributions (NICs) during career breaks to maximise your State Pension. You’ll need to have paid 35 years’ worth of NICs to claim the full State Pension when you retire.

3. Increase your pension contributions, especially if you work part-time

While there are many factors influencing the gender pension gap, pay and working hours play a significant part.

In the UK, women are more likely to work part-time than men. According to figures published by the House of Commons Library, 37.8% of employed women were working part-time compared to 13% of employed men at the end of 2022.

If you work part-time, this could result in reduced earnings and pensions contributions, which might lower your retirement income.

Alternatively, you could choose to boost your retirement savings during periods of full- and part-time working, by increasing your contributions above the minimum set by your employer.

A financial planner can assess whether your current level of contributions will allow you to reach your retirement goals. They can use cashflow modelling to give you a clear understanding of how increasing your contributions could potentially improve your retirement income.

It’s also worth checking if your employer will increase their contributions if you raise yours. Some employers may match your contributions, essentially doubling the benefit of your additional savings.

4. Work with a financial professional to balance investment risk effectively

Investing might be an important part of your retirement plan. However, the level of return you receive is often linked to the amount of risk you adopt.

Taking fewer risks could lead to more stability, but it may also result in lower returns over the long term. Research published by the Harvard Business Review has found that, compared to men, women are typically more risk-averse when investing.

So, if you’re tempted to play it safe with your investments but then feel disappointed in the returns you make, you might benefit from working with a financial planner.

Having access to their skills, experience, and understanding of the markets, could help you review your attitude to risk and create a balanced portfolio.

Whether you’re too risk-averse or you’ve felt apprehensive about starting to invest, a financial professional could boost your confidence and help you align your investment strategy with your retirement goals.

Get in touch

If you’d like to learn more about how to make the most of your retirement savings, we’d love to hear from you.

Please email us at mail@delaunaywealth.com or call 0345 505 3500.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate cashflow planning or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.