The Gender Pension Gap
If you are employed, you will most likely and hopefully be paying into a private pension via your employer. The government introduced auto-enrolment in 2018, if you have done nothing and left your company to it, you will be putting in 5% of your PRE-TAX earnings and your employer will be putting in 3%.
THIS IS FREE MONEY. Firstly, your contributions are taken before you pay any tax, saving you money. And then your employer contributes an amount for FREE. You will never find any investment or income generating product that will give you a return like this for FREE.
Some lovely employers will contribute more, maybe matching the % you have put in, maybe more. And you can contribute more than the 5% minimum.
Please, please do not opt out. Speaking from experience here.
Let me tell you my pensions story
PensionBee have been doing some digging for me into old schemes from the 90s and 00s. I thought maybe there might have been a bit of money tucked away somewhere, it was worth a shot.
1999 I started working for HSBC aged 22, first post graduation job
I was not allowed to join their pension scheme until I was 25. I am going to blame a huge chunk of lack of education and terrible policy, on my then employer. Why was I not allowed to contribute to a pension at the age of 22? I got used to the money I was earning. How I wish I had started contributing to a pension from my very first salary, instead I heading to Louis Vuitton and bought a wallet. My sensible mind did step in a bit and I set up a Stocks and Shares ISA but only with £25 per month.
By 2002 when I was 25, I did start contributing to my pension, but decided to leave HSBC soon after and cashed in any contributions with my last pay cheque and kept the money. Another mistake.
In 2003 I moved as a newly qualified CIMA accountant to work for Tesco
I was earning a good salary aged 26, of around £40k per year. But I opted out of my pension contributions. I turned down a huge chunk of free money. I remember my thought process. At the time I felt like I couldn’t afford the £100 or so a month. Head in hands emoji required.
Around 2005 I was promoted at Tesco and decided to start contributing to the pension with my new pay rise. Then in 2007 I had the opportunity to take redundancy. I was pregnant at the time and saw the cash as a nice way to pay for a wedding and have 18 months of maternity leave and time with my first baby. I took the money and cashed in my entire pot of pension contributions. Oh my gosh.
By 2007 I was 30 and had nothing in my pension pot.
2008 aged 31 I started a new role at FQR, AKA Wine Rack/Threshers for those who remember, they went bust in 2009. I did contribute a nice chunk to my pension, as did FQR, and all was protected when they went into administration, couldn’t say the same for my three-month notice pay that they owed me.
In 2010 I started working for T-Mobile, which then became EE.
I was on a very good full-time salary of around £70k and made sure that I was putting money into my pension. Along came Jack, my third baby in 2012 and I decided to pause my pension contributions as I wanted to extend my time off with baby for as long as possible and maximise my monthly income during maternity leave. By 2013 I returned to work and returned to my pension contributions.
In 2015 I left EE and stopped my pensions contributions as I was setting up Mrs Mummypenny Ltd. I really, really could not afford to contribute to my pension. I left EE with redundancy money but that paid my mortgage and bills during the early days of Mrs Mummypenny (when it earned very little money).
2016 was the year that I first discovered PensionBee.
They consolidated my old pensions for me. They transferred my £42k of private pension over to them, and I then had a pension pot that I could contribute to (when I could afford it)
£42k after 16 years of working in roles where I was earning an average of £50k per year. This is not great. I don’t like to compare to my friends, but I do. And I have the smallest pension pot compared to everyone who has worked in similar roles to me.
Finally, in 2019, Mrs Mummypenny was earning decent money.
I started contributing money to my PensionBee pot again, 10% of my month turnover is what I put aside for my pension. It is a big amount to set aside, but necessary as my pot is nowhere near the estimated £4-500k I need for a comfortable retirement. I already have £50k sat in my pension pot with new contributions and growth of my PensionBee fund. I am on the right track, it is never too late to start your pension contributions.
Why oh why did I not heed any advice, why was spending so important to me? Every young person I speak to now I reiterate, please please don’t opt out. Pay money into your pension from as young an age as possible and just get used to that money going from your first pay day.
There will be times when you feel like you could stop your contributions, like when on maternity leave, but really do think twice about it. All that free money from your employer. Don’t do what I did.
This is a collaborative post with PensionBee.