Could 64p a day help women close the pensions gap?
New research from Fidelity has found that saving just 64p a day extra could stop women taking a career break missing out on pension provision later in life.
The group’s research showed that taking time off to care for family – either young children or elderly relatives – is one of the main barriers to women making pension contributions. It showed women should aim to save 14 per cent of their salary into a pension for every two years they take off work.
Saving 64p a day extra when a women returns to work will close the pension gap on those that have not taken any time out of the workplace.
Fidelity’s Retirement Savings Guidelines suggest individuals aim to save seven times their annual income by the age of 68, or 13 per cent a year. Those that take two years off work would would need to save 14 per cent to achieve the same pot at retirement age. The difference is just 64p a day on top of their existing pension provision.
A report this week by Which? found that the average working woman who took time off for childcare duties were likely to save £68,000 towards retirement, compared to £83,000 for the the working woman who takes no time off. In both cases, women would be significantly behind their male counterparts, who build up savings of £114,000.
Emma-Lou Montgomery, associate director for Fidelity International said: “Coming back from time off work can be a challenge…For women, who are still more likely to take time off for childcare, it can also mean a financial set-back as less money will have been paid into their pensions during this time. Yes, your partner can help by contributing some of their salary into your pension while you are off work, but it’s still important to have a plan in place for when you return to make up any shortfalls in your savings.
“These figures really highlight the power that putting away small amounts can have, and also show that workplace pensions provide the perfect vehicle to do that, as your money is invested and has ample time to grow. For women in particular, who will on average live longer, saving more earlier will not only offset any career breaks in the short-term but will help to ensure a comfortable retirement in the long term.”