News

Women’s pensions and the gender gap

12 February 2025

You’ve heard of the gender pay gap, but did you know about the gender pensions gap? It’s a natural consequence of the former, but it’s had much less coverage and much less political energy devoted to resolving it. Understanding our pensions, how our career and life decisions impact them, and what we need to do to prepare financially for retirement is the best way for women to try to level the playing field.

The financial gap between men’s and women’s pensions

Gender pension inequality is a real and important trend, that affects women from all different financial backgrounds, careers and ages across the UK. Although the Office for National Statistics (ONS) reports that the gender pay gap is declining slowly¹ – down to 13.1% in April 2024 from 14.2% in 2023 – and therefore so is the gender pension gap, there is still a large proportion of women aged over the age of 40¹ who will face financial inequality when they come to retire.

The most recent research published by the Pensions Policy Institute showed that women in their late 50s typically have pensions wealth that amounts to less than two thirds than that of men^2,. The Department for Work and Pensions concluding that women have 35% less private pension wealth than men³ – and this figure doesn’t even include those who have no private pension wealth at all, of which there are more women than men. These are staggering proportions considering that women tend to live longer⁴ than men, which naturally means they need financial support in retirement for longer.

Why is there an inequality between men's and women’s pensions?

There is no single reason for women’s pensions being – on average – lower than men’s; instead, there is a combination of factors that leads to the disparity. These largely revolve around the fact that women’s careers are often less consistent than men’s, with the UK’s pension schemes favouring a more stable and linear vocational path. Some of the events that contribute to a smaller pension pot for women include:

Career breaks: Women are more likely to take time out to have children than men. If you are not working, then you and your employer will not be contributing into your pension, resulting in a smaller pot than men who tend not to take a break from working to raise their children.
Gender pay gap: Despite the gender pay gap between men and women falling by approximately a quarter over the last decade, last year it was still standing at 13.1% for all employees and was highest for those aged 40 and over; staggeringly, it actually increased among those aged 50 to 59¹. If women are typically earning less than men, their pensions will inevitably be smaller.
Part-time working: After having children, women are more likely to choose to reduce their hours to spend valuable time with their families; the government’s 2024 Annual Survey of Hours and Earnings showed that 85% of male employees were in full-time jobs, compared with 61% of female employees¹. Additionally, the ONS reports that part-time jobs have lower hourly median pay than full-time jobs¹. These factors combine to reduce women’s earnings, and hence their pension contributions
Childcare costs: Even if a woman wishes to return to work after having children, for many this is just not possible due to the costs of childcare. In the 2024 report, Care Economy: society’s engine room⁵, published by UN Women United Kingdom, 25% of parental households surveyed had a mother who had unwillingly to give up work, while 26% had to reduce their hours against their wishes.
Caring for elderly relatives further reduces many women’s lifetime earnings, and hence pensions savings.

The significance of relationships

Crucially, even if you are a married woman whose partner has saved enough during their working life to support you both through your later years, you will need a good understanding of how your partner’s pension works to ensure that you are provided for in all eventualities, factoring in considerations such as how much of the pension can be paid to you should he pass away before you.

The picture is more problematic if you separate. Research conducted by Royal London found that divorced women have the lowest pension wealth⁶. While pension assets are an integral part of a divorce, research⁷ by the University of Bristol funded by the Nuffield Foundation found that typically only 11% of divorces with a pension yet to be drawn made an arrangement for pension sharing. This leaves divorced women at a further disadvantage.

The good news for women’s pensions

It’s not all doom and gloom for women, however; there are initial signs that things might be moving in the direction of bridging the gender pension gap. The first positive change stems from the government’s policy of automatic enrolment, which started to be rolled out from 2012. This legislation made it compulsory for employers to register their workers automatically in a pension scheme, which has led to more women – and men – saving for later life.

Another encouraging sign of change is that the gender pay gap is slowly decreasing, and is smaller among younger generations. Although those aged 22 to 29 have only got a gender pension gap of 1.3%¹, this could be because they have not generally made the family choices that can prove so significant for lifetime earnings and pensions, it may also be a sign that over time we will see the gap between men’s and women’s pensions decreasing.

The importance of getting financial help when saving for the future

As the UK pensions system is dependent upon your lifetime’s savings, it becomes especially important for women to save and invest wisely in preparation for later life. It is therefore recommended that women start financial planning as a way to combat this pensions gender gap. Working with a financial adviser will enable you to understand how much money you will need for your future and the best way to go about achieving this.

How to save for your retired life will largely depend upon your individual circumstances, such as what type of pensions you have, whether you are in full-time employment or not, your income and whether you are self-employed. Finding a scheme that works for you is the best way to ensure that you are financially prepared for your life after you finish working.

If you would like to better understand your existing pensions and how to plan for your future life with confidence, we are happy to offer an initial no-obligation consultation – call 01732 449 799 to book your appointment.

Sources

Amanda Redman

Amanda Redman Financial Planning