Gender pension gap: keeping gender disparity in the news

15 Sep 2023

This Pension Awareness Day (15th September), our specialists are calling for more to be done to raise awareness of the gender pension gap.

Glen Callow, our managing director at Prime Wealth, said the first step of rectifying the gender disparity in pensions is greater understanding and raising awareness. 


What is the gender pension gap?

The gender pension gap is the percentage difference between men and women in their retirement income. Women are part of the underpensioned group – a group of more than 8.6 million UK adults who are missing out on workplace pension savings - alongside those of the BAME community, the self-employed and those with multiple jobs.

The root of the problem is that by the time the gender pension gap starts to affect women, it is already too late to do something about it. With little to no government policies set to address the issue, it is vital that this topic is at the forefront of the news agenda.


Current research on the gender pension gap

According to a recent survey conducted by the Pensions Policy Institute (PPI), women, specifically divorced women, have a pension 42 per cent lower than the standard UK population. Single mothers currently fare the worst, with pensions that are a staggering 50 per cent lower than the average.


Why is there a gender pension gap?

There are many reasons behind gender pension inequality, naming career breaks such as maternity leave, which can lead to slower progression and pay, the statistic that women are more likely to take part-time jobs around parental roles and automatic enrolment starting salaries.

Due to the gender pay gap, the automatic enrolment into company pension schemes favours men over women. It is widely known that women are more likely to be in lower-paid and part-time jobs, so with the starting salary for auto-enrolment set at £10,000, they're less likely to be able to take advantage of being automatically enrolled into their workplace pension, losing out on employer contributions.


Issues contributing to the UK’s gender pension gap

If you are a single parent, you may have higher outgoings day-to-day as a proportion of household income, especially during the cost-of-living crisis. Saving for a pension can be put on the back burner, placing the needs of today over the needs of tomorrow. This is understandable with rising energy costs, mortgage rates and general cost of living, however, it is severely detrimental to retirement provision.

Another area that must be addressed is that those in underpensioned groups are more likely to still be renting in retirement, meaning they will be burning through their already-lower pension income far quicker than the average person.

It may seem all doom and gloom, but there are practical ways we can work to reduce this gender disparity in retirement funds. Talk to our experts today for advice on your pension.


How long will it take to fix the gender pension gap?

Current research suggests that the gender pension gap will remain for decades if no action is taken.

New analysis by LCP¹ notes that the success in reducing gender gaps in the state pension could be undermined in future if inequalities between men and women in workplace Defined Contribution pensions continue to rise.

LCP projections found that for new retirees, the gender gap on state pensions has closed dramatically and is set to disappear, which is good news for women. State pensions provide more than half of the income in retirement of a typical woman.

Data from the Department for Work and Pensions (DWP), obtained by LCP via a Freedom of Information request, shows the gender pension gap between men and women is down to two per cent for those who retired last year.

Full equality is expected to be attained during the 2030s because of the phased introduction of the new state pension, which began rolling out in 2016.


The gender pension gap in the private sector

In the private sector, there is set to be a major reduction in the pension gap between men and women when it comes to Defined Benefit pensions – but only because men’s pensions are set to decline dramatically.

Previously, private sector Defined Benefit pensions have overwhelmingly been received by better paid men, but as schemes have closed, men’s income from this source will start to decline sharply with each new group of retirees over the coming decades.

However, LCP identified a new gender pension gap appearing in the Defined Contribution space, with the inequalities between men and women in the labour market begin to be replicated in Defined Contribution pension outcomes. These are largely based on a percentage of what people earn and how long they work for.

Currently, there is a gap of around £25 per week between the average Defined Contribution pension income of men and women (based on Defined Contribution pots being annuitised at retirement), according to LCP calculations, but this gap will rise to over £30 per week (in current earnings terms) by the mid-2040s.


What can we do about the gender pension gap?

By simply by knowing the starting salary of auto-enrolment into company pension schemes; spending time understanding what a pension is and how much you're paying into it can help people take back control.

If you earn under £10,000, you can ask to be included in your company pension plan, or start your own private pension. Women in ‘Gen Z’ and tail-end millennials should consider starting to save for their pension as early as possible, as small contributions can make big changes over time.

It’s not just up to us to reduce this gender gap – the government must address the issue and find ways of tackling it. Childcare costs must be made more affordable for those who want to return to the workplace but can’t due to the financial cost.


Professional advice on pensions

One way women can guarantee they're making the most of pensions is to ask for advice. Get in touch with a financial planner who can advise you on the best way to make sure you are financially stable later in life. Increasing understanding and taking ownership of your pension is the first step.

Find out more about pensions advice and retirement planning with Prime Wealth or learn how the cost-of-living crisis is impacting pensions.


¹ On point paper: The Gender Pension Gap - How did we get here, and where are we going?

Current research suggests that the gender pension gap will remain for decades if no action is taken."