Women could fill the estimated pension shortfall of around £70,000 by increasing their pension contributions by 1 per cent, according to new analysis from Fidelity International, although career breaks can widen this gap further.

The research found that women would like to receive an average income of £28,197 per year over an expected timeframe in retirement of 19 years, which would require a pension pot of around £477,630, when taking into account inflation, the state pension and tax.

However, a 22 to 29-year-old-woman on the mean average salary of £23,001 and paying the minimum 8 per cent into their workplace pension for over 40 years would have a pension shortfall of around £67,025, equivalent to around two years and four months worth of income, even when taking account of salary growth and inflation.

There are steps women can take though, as the analysis found that increasing pension contributions by as little as 1 per cent could help women close this initial gap, and bring them closer to their long-term retirement goals.

However, the firm also warned that this pension shortfall could “very likely” be widened even further by any career breaks.

Indeed, the analysis showed that the same individual would need to increase their contributions by 2 per cent if they took a two-year break at 31, 3 per cent if they took a four-year break, and 3.5 per cent if they took a five-year break.

Fidelity International investment director, Maike Currie, highlighted the findings as demonstration of the "huge difference" small changes can make to long-term pension savings, arguing that the "power of 1 per cent is tangible once you crunch the numbers".

However, she also pointed to the analysis as evidence of the "noticeable disparity between men and women", explaining that women are highly unlikely to reach their pension goals without increasing their workplace pension contributions to at least 9 per cent.”

She continued: "Applying the same methodology to the mean average wage for men aged 22 to 29-years old (£28,932 according to the ONS), reveals men can achieve their retirement goals by contributing the minimum 8 per cent into their workplace pensions over 40 years, despite wanting to save more towards retirement compared to women according to Fidelity’s research.

“The average UK male said that they would like £30,490 per year once they retire and believe they will need this over 18 years.

"Despite the slightly shorter timescale, this requires a much larger total pension pot of £507,575.

"Again, those who choose to take a career break or pause their pension contributions for a year face a challenge in achieving this goal, but this can be breached by a small increase of 0.5 per cent to their workplace pension contributions."

According to the research, men would need to increase their pension contributions by 0.5 per cent for a one-year break at 34, while a 1 per cent increase would be needed for a two-year break, and 2 per cent would be required for a five-year break.

"While our research lays out the impact the gender pay gap holds for women’s pension savings, it also shows that when it comes to taking time off work to look after children, all genders will face the challenge of upping their pension contributions or fail to meet their long-term goals," added Currie.

"Child raising years are typically a time where money is particularly tight, making it a challenge to increase pension contributions. This is why it’s so important to start saving into a pension as early as possible. Failing that, never underestimate the power of 1 per cent.”

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