A lot of things can get in the way of putting money aside in a pension. Anything from grappling with high living costs, taking on part-time work, being on a lower income or taking time out to raise a child can damage someone’s pension pot.
And the evidence indicates that for women the hurdles can often be even greater. Government figures show there is a 48 per cent gap between the amount of money built up by men and women coming up to retirement.
The research showed that based on most recent data up to 2022, women aged 55 to 59 generally built up a private pension fund of £81,000, against £156,000 for men.
Meanwhile, new research from investment platform AJ Bell shows 36 per cent of men contribute between 6 per cent to 11 per cent of their monthly pay to a workplace pension each month, compared to 29 per cent of women.
Its data suggested women were more likely than men to contribute just 3 to 5 per cent of their monthly salary – an amount deemed by pension experts to not be enough to build a pot for a comfortable retirement.
This adds up over time and separate figures from Now:pensions suggest women have around £105,000 in pension savings when they retire, compared to £232,000 for men.
But there are vital ways that women can increase their chance of a decent retirement, even if they are lower earners, looking after children or caring for elderly relatives. These are eight steps women can take now to bolster their pension and help secure their financial future.
Options: Be proactive and consider all the options for boosting your pension pot
To get the full new state pension, you usually need at least 35 qualifying National Insurance (NI) years on your record.
But until a child is 12, if you get child benefit you should receive free NI credits towards your state pension.
So, while working is one way to get NI years, claiming child benefit, if you have children, is another. But you must make sure that you register for this and a trap in the system due to the removal of child benefit where one partner is a higher earner has made many women miss out.
In 2013 child benefit stopped being a universal benefit paid to all and began to be clawed back from higher earners through what is officially called the High Income Child Benefit Charge.
For more than a decade, until April 2024, child benefit was tapered if one parent or partner earned more than £50,000 a year until it was wiped out entirely at £60,000. The lower threshold was raised to £60,000 in 2024 and the upper one to £80,000.
Parents can either claim child benefit and then pay some or all of it back through the tax system, or register but opt out of payments altogether.
However, some higher earning households simply never registered to claim child benefit, on the basis that they would not get it. This meant parents who looked after children missed out on valuable NI credits towards their state pension.
This is Money has campaigned for years for the government to fix the system and prevent parents – mostly mums – potentially losing out on thousands of pounds in state pension due to the child benefit trap.
The Government announced in April 2023 that it would launch a new system enabling parents and carers to claim backdated NI credits for free. It had been due to launch in April 2026, but has now been delayed to April 2027.
Earlier this year Labour posted an update on the Gov.uk website asking parents to contact them if they will suffer a financial loss because of the delay to launching replacement credits.
When the service launches in April 2027, parents will be able to claim credits going back to January 2013.
There is little detail so far, and no guarantee take-up of these new credits will be sufficient to fix the problem.
Until the fix is implemented, parents with higher incomes are being advised to submit a claim for child benefit but tick the box to opt out of receiving payments, and only get state pension credits.
2. On a low income? You can still be auto-enrolled
Anyone earning less than £10,000 a year with any one employer will not be automatically enrolled into a workplace pension scheme.
This hits people on lower pay and those working a low number of hours. It can also affect people doing a number of part-time jobs and earning less than £10,000 a year for each.
Do not be despondent if you are on a lower wage and still want to join a workplace pension.
Sarah Coles, head of personal finance at AJ Bell, said: ‘Those who earn between £6,240 and £10,000 with one employer have the right to opt in and be treated like any other member of the scheme, so when you pay in you get employer contributions too.
‘Those who make less than £6,240 can ask to join a pension scheme through work, but won’t necessarily get employer contributions, so check what’s on offer.’
Now:pensions has argued that a lower earnings limit and removal of the £10,000 earnings trigger could bring 726,000 more women into scope for automatic pension enrolment.
3. Get pension contributions matched
If you are automatically enrolled in a pension, your employer will contribute at least 3 per cent to it. This is the bare minimum employer contribution.
Coles said: ‘Some employers will stick to the bare minimum, while some will split the contributions so you both pay 4 per cent, and others will offer to match extra contributions up to a specific level.’
She added: ‘If there’s an employer match, it’s a brilliant way of super-charging your efforts to save into a pension, so it’s worth checking your contract or talking to HR to see how much extra money you could make this way.’
Getting contributions matched by your employer is also a good way to boost the tax relief available on your pension.
4. Utilise Universal Credit
Claiming benefits such as Universal Credit (UC) counts towards the years needed to be able to claim the state pension.
How much UC you can get depends on how much you earn. If your pay goes up, your UC payment will go down. If you stop working or your wages go down, your UC payment will increase. For every £1 you earn from working, your UC payment goes down by 55p.
You can earn up to £427 a month before your UC payment starts to drop if either you get help with housing costs through UC or you live in temporary accommodation arranged by your council because you’re homeless.
If neither of these circumstances apply, you can earn up to £710 a month before your Universal Credit payment starts to fall.
> Read our guide to Universal Credit
Carefully used pension contributions can help you stay below the UC thresholds.
Coles said: ‘If you pay into a pension, your contributions are subtracted from earnings to calculate if you breach the allowance.
‘Given that your Universal Credit is cut by 55p for every £1 you earn over the work allowance, if you can pay £100 into your pension, you could get a 20 per cent top up from the taxman, and get £55 more in Universal Credit.’
It is worth noting that when calculating the value of your savings and investments to see if you are above the £16,000 savings limit for UC, none of your unused pension pots will be factored in.
5. Don’t stop contributions during maternity leave
If you are having a child, do not be tempted to pause your pension contributions while you are on maternity leave, even if money is tight.
Coles said: ‘If you can keep up payments, you only have to pay a percentage of the actual maternity pay you’re getting, while your employer needs to be making the same contributions as before, so you get far more bang for your buck.’
You need to check your pension contributions will be paid correctly during the 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.
If you are self-employed and contributing to a Self-invested personal pension (Sipp), keep adding to it every month if you can. You cannot get statutory maternity pay if you are a sole trader, but you might be able to claim Maternity Allowance instead.
6. Plan pensions in a duo
If you are married or in a civil partnership, do pension planning together as couple.
If one of you stops working for a time, consider whether any pension payments can be kept up.
Eamonn Prendergast, a chartered financial planner at Palantir Financial Planning, told This is Money: ‘If you’re married or in a civil partnership, retirement planning should be viewed as a household exercise rather than an individual one.
‘Where affordable, it may make sense to build pension savings for the lower-earning spouse, helping both partners build financial security for later life.’
If you are not earning, your partner can pay in up to £2,880 a year and it will be topped up by the government to £3,600.
The options might be different if it is a ‘net pay’ or ‘relief at source pension scheme or if your employer makes payments directly into a private pension or self-invested personal pension for you.
Be aware that contributing to another person’s pension before factoring in your own financial wellbeing has been sorted could be counter-productive in the long-run and result in a shortfall in your own financial resilience later in life
7. Add one-off sums to your pension
AJ Bell’s findings suggest men are more likely to use a one-off payment like a bonus to boost their pension pot.
It said this was likely to be because men often have larger average incomes, meaning they have more freedom to cover one-off costs via their salary.
If you, for example, get a £1,000 bonus from work you can add it to a pension and the government would add £250 in tax relief if you are a basic rate payer. You could potentially claim back more if you’re a higher or additional rate tax payer.
When it comes to how much you can add to a pension each year, there is a limit. The standard annual allowance is £60,000, but this can be lower for high earners due to the tapered annual allowance. If you go over this limit HM Revenue & Customs will claw back the tax relief you received.
You may be able to use the carry forward rule to contribute more than £60,000 if you have unused allowances from the past three years.
> Read our guide to pension tax relief and how it boosts your pot
8. Increase your pension contributions
If you get a pay rise try to ensure you increase your pension contribution, even if only by a small amount.
For most people a pay increase will naturally feed through to their pension, if they pay in a set percentage. But if you are paying in a lower percentage, it is worth considering upping it at this point, for example going from 3 per cent to 4 per cent.
Also consider upping your pension contributions if a regular repayment you have ends or, if applicable, your childcare costs fall.
Even if you only nudge your pension contribution at work up, over the long-term this can make a real difference.
Analysis by PensionBee this year showed that for someone earning £25,000 a year, a 1 per cent contribution increase would mean an extra £21 per month going into their pension.
For someone earning £40,000, it would represent £33 per month more into their pension, costing you around £27 after tax relief.
It can be advantageous to divert savings to your pension to get this extra employer money, rather than sticking it in a cash Isa or other account, but this does mean you will be locking the money up until at least 55 – soon to be 57 – as pension funds cannot be accessed until then.
Also remember that pension policies often change and need to be watched closely.
Some pension savers will face a hit to the amount of money they can add to their pension without paying NI, under measures announced in the Budget last year.
From 2029, there will be a cap of £2,000 per year that can be shielded from employer and employee NI contributions by using salary sacrifice.