A rise in the number of self-employed women has raised concerns that the pensions gender gap could widen in the coming years.

Self-employed women on the up

Official figures show that in the second quarter of 2016, around 1.5 million women described themselves as self-employed, representing a rise of 22% over the past four years. This is double the rate of growth of male self-employment.

But government statistics also show that the percentage of female business owners who regularly pay into a pension is significantly lower than the rate among men: just 12% of self-employed women contribute to a personal pension compared with 17% of male bosses.

By way of contrast, among employees – the majority of whom are now given the chance to join a pension scheme supported by their employer – participation rates are 59% for women and 60% for men.

Pensions gender gap could increase

According to insurer Prudential, these figures suggest there is a serious risk that, as more women start working for themselves, the current differences in pension provision between the sexes could widen to an even greater degree.

The company’s latest research shows that women have an average retirement income level around £5,400 less than that of men – although the gap has been narrowing to some extent over the last few years.

Much of this difference is down to the fact that, over recent decades, women have been more likely to spend time out of the workforce – for example, to bring up children or to care for elderly relatives.

Added to the fact that women’s average earnings have tended to be lower than men’s, the size of women’s private pension funds (as well as the amount of state pension they are entitled to) has suffered in relative terms.

Kirsty Anderson at Prudential said:

“There is a risk that the increase in self-employed women will undo some of the progress in shrinking the retirement income gender gap that we have seen in recent years. When becoming self-employed, pension contributions can easily slip down the priority list.

But it is important to remember that one of the main reasons for lower average retirement incomes among women is the periodic gaps in their pension contributions.”

Anderson said that while the Government’s introduction of the auto-enrolment pension programme for employees was welcome, anyone who decided to enter self-employment would be giving up this benefit. It is therefore vital, she added, that all self-employed workers should think about making regular contributions to a private pension as soon as possible.

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