Why does the gender pensions gap still exist, and what can we do about it?

Monday, 11th March 2024

By the time you retire, your pension could be one of the most valuable assets to your name, second only perhaps to your home.

Yet if you are a woman, the statistics show that you may retire with much less in your pension than men your age.

The gender pensions gap report 2024 from NOW: Pensions says that:

  • Women retiring today do so with around £69,000 in their pot
  • Their male peers retire with almost three times more, having an average of £205,000
  • A woman would have to begin making pension contributions at the age of three to retire with a man’s average pension.

While these statistics may shock and frustrate you, it is important not to give up on your pension wealth, especially if you are a woman. There are steps you could take towards boosting your pension, no matter what stage of life you are in.

Keep reading to find out three reasons why the current gender pensions gap exists, plus two tips for growing your pension before retirement.

3 data-driven reasons behind the gender pensions gap

While the pension inequality women experience in the UK is unacceptable, it may be useful to understand the reasons behind it.

Here are three data-driven reasons behind the UK’s gender pensions gap.

  1. Career breaks

The NOW: Pensions report found that a woman who takes a 10-year career break to raise a family may miss out on £39,000 worth of pension wealth by the time she retires.

While stay-at-home fathers are becoming more common, it is still much more likely that a mother would take a career break in order to raise her family. The report says that just 2% of men with dependent children are stay-at-home parents, compared to 15% of women.

Staying at home is an important and empowering choice for many women, but if you do so, a pause in pension contributions over several years could significantly affect your pension savings. Taking a career break could mean that your pension lies “dormant” for many years (although it doesn’t have to be that way, as we’ll explore later).

  1. Divorce

Sadly, divorce could have a greater financial impact on women than it could on their husbands.

According to a January 2024 Legal & General report, only 20% of couples take their pensions into account when divorcing – but without a conversation around this important asset, women could lose out on retirement stability later on.

Especially when children are involved, women typically opt to remain in their family home upon divorce. To balance this, men may then take both parties’ pension wealth. While a fair split in the here and now, this division of assets may mean that, in order to retire comfortably, the woman might need to sell her home.

  1. The gender pay gap

The Office for National Statistics (ONS) says that the gender pay gap stood at 7.7% in 2023, up from 7.6% in 2022 but down from 10% in 2013.

Where children are involved, the wage gap widens – the NOW: Pensions report reveals that married mothers earn 38% less than married fathers on average. There is also a 45% employment gap between men and women who have children.

While we do seem to be making progress on the gender pay gap overall, having lower earnings than your male peers could offer you fewer opportunities to boost your pension payments.

2 essential pension-boosting tips for women

Now that you are aware of three significant contributors to the gender pensions gap, let’s set our sight on the future and look at two tips for improving your pension despite the odds.

  1. Prioritise consistent pension contributions

If you are a woman, looking at your pension circumstances and upping your contributions could be extremely helpful. Here are some details to consider:

  • Remaining consistent with your contributions could help your pension to benefit from compound returns over the course of your career.
  • For women who are employed rather than self-employed, your employer is required to make their own contributions to your pension, further boosting your pot’s growth. You could review your workplace pension scheme and discuss an increase in contributions with your employer where possible.
  • If your annual contributions currently fall below the Annual Allowance of £60,000, which applies to most earners, you could increase them and receive tax relief on your payments.
  • For those who are yet to have a family, but plan to do so in the future, it may be even more crucial to pay as much as possible into your pension while you are working.
  • On returning to work after a career break, prioritising paying into your pension could help you make up the shortfall.
  • If you are married, your spouse can pay into your private or workplace pension as well as their own, provided that their contributions do not exceed their annual salary. Not only might this keep your pension wealth equal, even if you have taken time off work for a period of years, but it could also reduce your partner’s taxable income.

No matter whether you are just starting your career, raising a family, returning to work after a break, or in the run-up to retirement, the above points could help you to keep pension contributions at the front of your mind throughout your life.

  1. Create a comprehensive financial plan that keeps your retirement goals in mind

Of course, your pension is just one cog in the machine of your finances. Your earnings, savings, investments, and financial protection all have their own part to play, alongside the support you offer to your children and other family members either now or later on.

As such, one way to close the pension gap could be to create a comprehensive financial plan that holds your pension in high importance. You can do this alone or with the help of a qualified financial planner who could help you to:

  • Take all the elements of your money into account and see how they fit together
  • Protect what you have with a package of financial cover that is appropriate for your circumstances
  • Work out your most treasured life goals and see how your money could help you to achieve them
  • Think about how you would like to financially support your children, if you have them, later in life
  • Look at how your spouse or partner’s finances might play a part in your plans
  • Assess your retirement circumstances and prioritise your pension where you can.

Once you have a financial plan in place, you could experience significant peace of mind that you are giving your finances the chance to thrive, despite the inequalities between men’s and women’s wealth.

Get in touch with a financial planner who could help you put your pension on track

If you would like help constructing a robust financial plan that works for your unique life circumstances, a financial planner could be the ideal person to talk to.

At Kellands, we specialise in working with individuals around the UK who are determined to put their life goals first and want to find ways to make their money work harder in the background.

Contact us at [email protected], or call 0161 929 8838.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.  Workplace pensions are regulated by The Pension Regulator.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.