Today, women retire with average pension savings of £69,000 compared to £205,000[1] for men. This gap of  £136,000[2] worth of pension savings means that a woman would have to work an extra 19 years to be able to bridge it and to afford the same level of retirement savings as a man.  The gender pension gap is twice the size of the gender pay gap, and affects a significant proportion of female savers in the UK. 

In this blog, we look at the reasons why the gender pension gap exists and what female savers in the Fund can do to improve their retirement outcomes. 

What is the gender pension gap?

The gender pension gap is the difference in pension savings wealth between men and women at retirement age[3]. As it stands, the difference that exists is substantial, with the latest statistics estimating a gap of up to £136,000 or 19 years, as shown above.  

Why does the gender pension gap it exist?

There are multiple causes of the gender pension gap. We look at the main ones below.

Life events and subsequent career breaks

The career breaks women take to care for their families’ amount to £39,000 in lost pension savings, according to NOW: Pensions’ 2024 gender pensions gap report.  This is because, in many cases, females pause their careers or to cut down on work in order to care for their children (this is also known as the ‘motherhood penalty’).

The 2023 Women and Retirement report, produced by Scottish Widows, shows that 44% of UK mothers spend all 5 working days looking after their children (compared to just 16% of fathers). The alternatives many women think about after having children are having a longer career break, doing part-time work, freelancing or taking on multiple jobs. However, this means that many women might not be earning enough to pay into a private or workplace pension. People in the UK need to earn at least £10,000 a year in order to meet the criteria for pension  auto enrolment.

The 2024 gender pensions gap report also shows that women are far more likely to take time out of work to care for an elderly or sick family member.

What is more, the fact that they’ll have worked less years throughout their life could also  disqualify them from receiving a State Pension them from receiving a State Pension. To get any State Pension, people in the UK are required to have worked for 10 qualifying years. To get the full State Pension, 35 qualifying years of work are required. The 2023 Women and Retirement report also says that often women take around 10-year career gap to shoulder caring responsibilities which poses a real risk of not qualifying for any state pension further down the line. You can check your State  check your State Pension forecast forecast on the government’s website.

The gender pay gap

The gender pay gap – the difference between the earnings of men and women – is deemed one of the major drivers of the pension gap. Women have been earning and still to this day earn on average less than men, although 2023 figures[4] show a slow decline over time. In April 2023, the gender pay gap stood at 7.7% according to the ONS.

The significant gap in income means women have less capacity to meet increasing financial demands. The 2023 Women and Retirement report, by Scottish Widows suggests that on average, women are paid 15% less per hour across all jobs in the UK. The report also highlights that only 59% of women aged 22-65 are saving into a private pension, compared to 71% of men, while 62% of men are also expecting to be able to draw from other long-term savings sources in retirement, compared to just 50% of women.

It’s not all doom and gloom for females, though. The 2024 pension gap report shows a positive tendency of more women undertaking higher education, and therefore entering the workforce with higher salaries. If the trend continues, the gender pay gap is likely to reduce further over the coming years, as more young women go on higher education. This could mean better retirement outcomes too.

The current auto enrolment criteria

Women are more than twice as likely as men to miss out on being automatically put into a workplace pension, according to 2023 analysis published by the Trades Union Congress (TUC). Around 100,000 more young female workers than young male workers are currently locked out of auto enrolment due to their age and earnings.

As it currently stands, to qualify for auto enrolment, a worker must be 22-years-old and earn at least £10,000 a year.

There are active proposals to reduce the qualifying auto enrolment age to 18. If the age and earning restrictions were removed entirely, around 885,000 young female workers would become eligible for auto enrolment.

Lack of awareness in women of pension entitlement upon divorce

Recent research[5] shows that 60% of divorced women in the UK didn’t discuss pension assets during their divorce, while over a quarter thought they are not part of the proceedings. This has cost female divorcees an average of up to £77,000 in pension money. The research has found the reason for this is women’s lack of understanding of their entitlement at the time of divorce.

The figures are worrying, considering the retirement income can be one of the most valuable assets people possess after the family home. Moreover, many women won't benefit from the sacrifices to their careers and earnings they make for their families if pension wealth is not shared at the time of divorce.

What to do make the most of your pension with the Fund

While the gender pension gap will continue to exist for quite some time, there are some simple steps you can take to ensure you’re making the most of saving for retirement with the Fund.

Keep track of your pension

Do you know how much you’ve saved into your pension so far? If you don’t, find out now! Request an estimate of your pension benefits (to do this you’d need to  log into your myFund account), then use the tools on our website to see whether you’re on track to have the retirement you hope for.

• DB members, use  the Retirement Budgeting Calculator and the Pension Planner to see how much you’ll need when you retire and how changing the age at which you wish to retire and some other factors might impact your retirement income
• IWDC members, you can also use the Retirement Budgeting Calculator on our website but you should also log into your myFund account and check out the Retirement Modeller – a handy tool to help give you an idea of what your pot might be worth when you come to take it
  

Think twice before stopping your pension contributions

If you’re looking for ways to give your bank account a bit of a breather, a temporary pause on your pension payments may look like a possible solution. However, it’s important you think long and hard before you make the decision as you’d miss out on some valuable benefits.

Here’s why stopping your pension contributions might not be a good idea even at times of financial strain: 

• You’d lose out on contributions from your employer (for DB members this is at least 60% of the money you put in normally).
• You’d miss out on tax relief from the government.
• You’d interrupt the compounding effect that happens when you have money invested for a long period of time.  
• You may never start saving again once you’ve had a flavour of having some extra money in your pocket each month.

Set some goals and be proactive

It may help to set some saving goals to help get where you want to be financially when you retire. The Fund offers pension top up arrangements called  BRASS (for 1970 Section members who joined the Fund before ​1 April 2007) and  AVC Extra (for 2007 and CARE members, and top contributors of BRASS) for members who wish to pay extra towards their pension. It’s a fantastic way to give your pension a bit of a boost, as you get tax relief on what you put in. You can save as little as £2 per week if you wish, and you don’t need to save a set amount every month.

If you happen to receive a bonus or a pay increase, for example, think about paying more into your pension if you can.

For ideas to help you manage your money, you can use the MoneyFit tool in your myFund account. It gives you a personal action plan with helpful tips and advice, to help you free up more money and save more into your pension.

Check in with your pension regularly

In the same way you check your bank or social media accounts, make time for checking in with your pension on a regular basis. It helps to know where you’re at with saving for retirement as it means you are more likely to incorporate retirement planning into your thought process before making a financial decision.

Your pension will provide for you when you stop work one day, but you need to take care of it now and help it grow so you have enough to enjoy a decent life in retirement. 

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