Women retire with pensions TWO THIRDS the size of men’s… but new dads can help fix this

Fathers should be encouraged to share parental leave with mothers to help close the gender pension gap, a new report suggests.

Women with private pensions retire on a median £173,000 while men stop work with £286,000, representing a 32 per cent gap between their funds, a study by Scottish Widows found.

The pension firm said employers should raise awareness of and normalise shared parental leave, which allow parents to split up to 50 weeks’ parental leave and 37 week’s pay between them.

The rules on shared parental leave are explained on Gov.uk here.

The 32 per cent gap is smaller than the 48 per cent gap which existed between men and women aged between 55 and 59 between 2020 and 2022, according to data recently reported by the Government.

And the gender gap has now shrunk to 1 per cent for the state pension, which pays £12,000 a year at the current full rate.

Lower pay and unpaid caring duties take a toll on how much women can save for old age

Other suggestions for improving women’s pensions, according to Scottish Widows’ annual report on the topic, include persuading them to first build an emergency savings pot of £1,000 to give them more confidence to invest, and encouraging better financial planning before and after maternity leave.

Scottish Widows found that women are currently 12 times more likely to take career break to raise children than men, at 36 per cent versus 3 per cent.

And some 42 per cent of women found that the break in their career reduced their ability to save.

A series of reports have shown women’s pensions typically start to lag significantly behind male colleagues’ funds if they start a family, with lower pay the other main cause of the disparity.

Unpaid caring for older family members and the menopause disrupting ability to work can also widen the gap later in life.

Scottish Widows polled more than 4,000 people in the late summer, weighted to be representative of UK adults, about pensions and retirement planning, savings, investments, career breaks and financial planning behaviour.

That was on top of a general retirement survey among more than 5,000 people early this year.

Susan Hope, retirement expert at Scottish Widows, says: ‘Millions of women in the UK are living with the gender pension gap and they don’t even know it.

‘There are a couple of straightforward ways to help address these gender pension concerns. We need to improve awareness and take-up of shared parental leave policies.

‘This policy is critical, yet four in five women who had children in the last 10 years didn’t take advantage of it. This represents around 2.7 million working mothers, and 8 per cent revealed that their spouse’s workplace was not supportive.

‘Separately, spouses should be actively saving into women’s pensions during any career breaks, if possible. This is also known as third party contributions and, while often overlooked, is a helpful financial planning tool.

‘Not only can it maximise tax relief for those who have used up their allowance, this can help to plug gaps in pension contributions while earning power is limited.’

How to stop your pension falling behind when you have children

This is Money has a guide to how couples who save together can boost their pensions – but people who do this should be aware of the pitfalls.

Experts warn you should concentrate on maximising your own pension before trying to increase your partner’s.

There are also circumstances where it makes financial sense to focus on the higher earner’s pension, depending on the level of tax relief each partner can receive.

If you later divorce but your pension pots aren’t too unbalanced, there can be less hassle and hostility over dividing them.

We also have a guide to how to keep up with pension saving when you have a baby, which covers boosting contributions before and afterwards to fill the hole, and employer payments into pension pots during maternity leave.

You need to check your employers pay pension contributions correctly during the different periods of statutory maternity pay and unpaid leave.

Some employers are more generous than the statutory rules, others stick to the letter of them, and some might make errors – so you need to check the specific terms of your own scheme.

You should also claim child benefit, even if your income is too high to qualify for the payments, in order to receive valuable free credits that go on your state pension record.

You can tick a box asking for ‘credits only’ to avoid the hassle of having to fill in a tax return. This means His Majesty’s Revenue & Customs takes the child benefit back later.

The Government has promised to let people who unwittingly missed out repair their state pension records by creating a new credit they can apply for from April 2026.

How to sort out your pension if you fear it’s falling short

1) If you are worried about whether you will have saved enough, investigate your existing pensions. Broadly speaking, you need to ask schemes the following questions.

– The current fund value.

– The current transfer value – because there might be a penalty to move.

– Whether the pension is in a final salary or defined contribution scheme. Defined contribution pensions take contributions from both employer and employee and invest them to provide a pot of money at retirement.

Unless you work in the public sector, they have now mostly replaced more generous gold-plated defined benefit – career average or final salary – pensions, which provide a guaranteed income after retirement until you die.

Defined contribution pensions are stingier and savers bear the investment risk, rather than employers.

– If there are any guarantees – for instance, a guaranteed annuity rate – and if you would lose them if you moved the fund.

– The pension projection at retirement age. You can use a pension calculator to see if you will have enough – these are widely available online.

2) You should add the forecast figures to what you anticipate getting in state pension, which is currently £230.25 a week or nearly £12,000 a year if you qualify for the full new rate. Get a state pension forecast here.

3) If you are tempted to merge your old pensions, read our guide first to ensure you won’t be penalised.

4) If you have lost track of old pots, the Government’s free pension tracing service is here.

Take care if you do an online search for the Pension Tracing Service as many companies using similar names will pop up in the results.

These will also offer to look for your pension, but try to charge or flog you other services, and could be fraudulent.

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Women retire with pensions TWO THIRDS the size of men’s… but new dads can help fix this

How to stop your pension falling behind when you have children

How to sort out your pension if you fear it’s falling short