When it comes to finances and our money, there are a few specific problem areas that we, as women, need to pay very special attention to. One of them is the impact of career breaks. Taking time out to care for kids and/or elderly relatives is something that tends, more often than not, to predominantly fall into a woman’s lap.

When you’re spending time caring for others that inevitably takes away the ability to earn (or certainly earn as much as you otherwise could) during that period of your life. Whether it’s having a baby with a period off work on maternity leave, or a growing family necessitates a switch to school friendly working hours. Or caring for a relative forces you to work part-time or even give up paid employment altogether. It can have a real and very negative impact on your financial picture. And that is why, keeping an eye on our finances while we also look after others is essential.

Think about your pension contributions

If you’re not earning above the £10,000 threshold that qualifies you for auto-enrolment contributions, you could consider setting up a self-invested personal pension (SIPP).

It’s worth remembering too that partners who are in full time work, or with extra savings to spare, are permitted to make contributions to your pension on your behalf, so you don’t suffer from any gaps in retirement saving during any periods out of paid work.

Even if you’re not earning a penny, you or your partner can still pay in up to £2,880 a year, which with tax relief could bump up the total to £3,600.

Don’t pay a price simply for being a woman

Young women putting money into a pension in line with the government’s auto-enrolment scheme may still end up with a pension pot that is more than 10% smaller than a man who starts and ends their working life at the exact same age.

Based on Office for National Statistics (ONS) projections and adjusting for inflation, the average pension pot for a man aged between 25 and 34 today will be £142,836 by the time he reaches state pension age. A woman within the same age bracket will have £126,784 when she hits the same age. That is a difference of almost 11%.

Why? Well because women still tend to earn less and take time away from their career to raise children or care for a sick or elderly relative.

The good news is that you can do something about it

By paying an additional 1% of your salary into your pension, as soon as you start your working life, you can close the gap. It is a relatively modest sum (on average £35 a month) which if paid in for the 39 or so years of your working life, will mean you can retire without immediately being negatively-impacted, just for being a woman.

Next steps

Want to see how much of an impact a 1% increase in savings can make for you? Use our power of small amounts tool to see how a small change can make a big difference.


Important information

The value of investments and the income from them, can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Withdrawals from a pension product will not be possible until you reach age 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.