By David Triggs

Gaps are rarely good things. Sure, a gap year backpacking around South East Asia might sound splendid, but certain gaps aren’t so wonderful, such as:

• Gaps in the road 
• Gaps in your CV 
• The retirement income gender gap 

Looking specifically at retirement, new research from Prudential suggests that women retiring this year will now on average be £6,400 worse off than men.

A survey of 10,605 non-retired UK adults was conducted by Research Plus. It revealed that the gender gap of £5,300 in 2016 had increased by £1,100, meaning that:

• Men expected to receive an annual retirement income of £20,700 
• Women expected to receive an annual retirement income of £14,300 

So why are women still losing out? And more importantly, what can they do themselves to increase their income in retirement?

Surely the gender gap should be closing?

It was. Well, for the last 10 years, anyway.

For example, 2008 saw a gender gap of £9,500, with men expecting an annual retirement income of £20,800 and women £11,300. This narrowed steadily year on year, until in 2015 there was only a difference of £4,800. 2016 saw that number rise to £5,300, bucking the trend, before widening even further to the current figure.

A number of factors have been suggested as primary causes for the gender gap, such as:

• Women choosing to retire early, before they have made enough National Insurance Contributions (NICs) to qualify for the full State Pension 
• Taking career breaks to have children, or care for elderly relatives 
• Women being paid less on average compared to men in similar job roles 

The final point is particularly relevant, as the latest figures from the Office for National Statistics (ONS) show that there is still on average an 18% difference in the amount that men and women doing the same profession get paid. Lower earnings limit the amount that can be paid into a pension, with many women being unable to afford the same contributions as men.

Kirsty Anderson, The Retirement Income Expert at Prudential, commented: “It is encouraging that many women planning to retire this year feel financially well prepared for their years in retirement. In fact, women’s expected retirement incomes this year are the second highest on record. However, the gender gap in retirement incomes continues to grow, probably reflecting the fact that many women will enter retirement having taken career breaks and changed their working patterns to look after dependants. Unfortunately, as a result, many women will end up with smaller personal pension pots and some are also likely to receive a reduced State Pension.”

How can women increase their income in retirement?

Other than delaying your retirement to boost your income (which can have many advantages, both financially and socially), there are numerous ways to ensure that you are able to afford the lifestyle you desire when you stop working.

Join a workplace pension

The main benefit of joining a workplace pension, aside from the Government paying in, is the employer contribution. Three parties pay into the scheme:

• You 
• Your employer
• The Government 

Employees who at least 22 years old, and earn a salary of £10,000 or more must be offered a workplace pension by the 1st of February 2018. Paying into a pension early on in your working career will boost your retirement income significantly, so make sure that you don’t opt out before knowing exactly how it could help you.

Plug any gaps in your NICs

You currently need to have 35 qualifying years to receive the full new State Pension, either through your payroll as an employee, through your tax self-assessment, or voluntary contributions if your income is below a certain level.

If, for any reason, you haven’t paid NICs for 35 years in total, these gaps in your record could stop you receiving the full State Pension. To find out if there are any gaps in your record, you can check your National Insurance record online here. Voluntary contributions can fill any gaps, boosting your income when you retire.

Make yourself a priority

Putting money away can be a hard habit to form for many, but it does eventually become a lot easier. If you try and save any money left at the end of the month, and sweep it into your pension, you may find that some months leave you with little. Deciding on a target amount each month, and paying that into your pension on payday will guarantee that you maintain a solid level of contribution.

It is sometimes necessary to make sacrifices to boost your income in retirement, but it will be worthwhile in the long run.

Pay a realistic amount

The minimum contribution needed for a workplace pension probably won’t be enough to afford a comfortable lifestyle in retirement. Paying in a realistic amount will ensure that your pension pot is large enough when the time comes to stop working.

A professional adviser or planner will help you to work out how much you need to put away to make the most of your retirement, and ensure that you don’t have a shortfall.

Don’t stop paying in when you stop earning

It’s a common misconception that you can’t pay into a pension when you stop earning an income. This isn’t true at all.

There are, however, certain limits to how much can be paid into a pension whilst still claiming tax relief. This limit is currently £2,880 per year, which works out to £3,600 once tax relief is added.

It can be easy to neglect your pension when you stop working to have children, or look after elderly relatives, but continuing to pay in will boost your annual income significantly in retirement.

Whilst these tips don’t disguise or make up for the fact that there is still a gender pay gap, it could mean that the retirement income gender gap isn’t as problematic for women. In an ideal world, both men and women will see their retirement income afford the lifestyle that they have been working so hard for.

If you are worried about a shortfall in your pension, or would like to know more about planning for your future, please get in touch by calling or emailing.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.