We were recently invited to an event organised by NOW:Pensions, called ‘Facing an unequal future – Closing the gender pensions gap’. The team at NOW:Pensions presented research they had commissioned with the Pensions Policy Institute (PPI), which has unearthed some shocking statistics about the health of women’s pensions.

In the UK, 1.5 million women in their 50s have no private pension of their own, and of those that do, their pensions are (on average) 47% smaller than those of their male counterparts. The origins of this inequality are easy to pinpoint – women generally take more time out of full-time work to raise children, and are therefore spending crucial financial years not saving. The majority of working men continue in full-time employment, enabling their pension pot to grow.

The importance of saving into a pension while you’re young can’t be overstated. The PPI found that a pension pot needs to contain at least £460,000 to provide for a ‘comfortable’ retirement. Since women have a higher life expectancy than men, they will need to save between 5% and 7% more to make up for these extra years. Starting to save early is crucial for long-term financial security.

Yet many young people are unaware of the risks of ignoring pension contributions until they reach their late 30s and 40s. It’s easy to see how such a pattern could emerge amongst the 22-29 age bracket. More immediate concerns such as paying back student loans, saving towards a house deposit or paying rent can understandably take precedence. But putting aside an amount of money each month – no matter how small – is a great habit to get into in the early days of a career. This is especially important if you are likely to take off extended periods of time or move to part-time work in order to care for children.

Part-time work is one of the driving factors behind the gender pensions gap. In the UK 41% of employed women work part-time, a statistic that includes 1.4 million mothers who earn less than £10,000 a year, and don’t qualify for auto-enrolment. Even among the part-time employees that opt into the scheme, the first £6,136 of their annual earnings are not pension deductible. This means the loss of a sizeable amount into their pension pot, both from their own earnings and from the employer.

Two of the solutions that NOW:Pensions offer for reducing the gender pensions gap are: to remove this trigger amount, allowing more women on low incomes to be automatically enrolled into pension schemes, and to remove the lower earnings limit, so that part-time workers can save and benefit from employer contributions from the first pound that they earn.

Pension contributions have increased in recent years, especially amongst the youngest members of the workforce. According to the Department for Work and Pensions, since 2012 pension contributions by 22-29 year olds have increased by 60% from 24% to 84% in the private sector (thanks to auto-enrolment). However, it’s still not perfect. A considerable proportion of this age group still aren’t saving into their pensions, and they will experience the consequences of today’s actions in the future.

Both employers and the Government should be doing more to communicate the risks of not contributing early, particularly to young women. One member of the panel at the NOW:Pensions event shared that not saving towards her pension in her 20s has cost her an estimated £100,000 of savings, which she was unable to recover over the rest of her career. Had the risks been explained to her earlier, she believed that she might have found herself in a different situation.

Whilst the individual doesn’t have the power to amend pensions policy they can make small changes whilst they’re young, which will benefit them in the future. However, in order to make these alterations, they need to be made aware of the impact on their savings in the first place. 

The pressure should be mounting on employers and the Government in the light of the research, to pass on this concerning truth – especially to women under 30 when they first sign their contract of employment. It’s clear that communicating the importance of pensions saving is crucial, to ensure the long-term economic well-being of generations of women to come.