Understanding the gender pension gap

Why do women often find themselves disadvantaged in retirement?

Significant disparities continue to remain when it comes to retirement savings, with the gender pension gap standing out prominently. Even though the gap manifests across various demographics, including age, job types, and income levels. However, it is women who bear the brunt of these inequalities, often finding themselves at a financial disadvantage in retirement. This disparity is primarily due to lifelong differences in savings and the contributions made to pension plans.

The gender pension gap is not merely a consequence of individual choices but a complex issue influenced by societal norms and work patterns. Women are more likely to engage in part-time work or take career breaks to manage caregiving responsibilities, directly affecting their earnings and, consequently, their pension savings. Despite similar participation rates in pension schemes, the amount saved by women lags significantly behind that of men.

Factors contributing to the gender gap

Despite similar pension scheme participation rates, women save less than men throughout their careers. This discrepancy is stark, with a 16% gap in their 30s widening to 43% by the age of 55, the research highlights[1].

Historical perceptions painted women as less likely to engage with pensions, but recent findings contradict this, showing women value pensions highly when considering job offers[2]. However, many women take lower-paid, part-time roles to balance work with caregiving responsibilities. In fact, about one million women under 50 are outside the workforce due to such commitments[3].

Impact of caregiving responsibilities

Care responsibilities, often shouldered by women, significantly affect their retirement savings. Statistics from the Office for National Statistics reveal that older female workers are twice as likely to have caregiving duties, which detracts from their ability to save for retirement[4].

While two-fifths of workers enhance their pension savings through employer matching, fewer women than men take advantage of this opportunity. Affordability is a common barrier, with half of the women citing it as a reason compared to 39% of men.

Addressing the savings disparity

Auto-enrolment has boosted savings among women, yet the interruptions caused by parenthood and caregiving continue to affect their pay,
career advancement, and, ultimately, their pension savings. Decisions to reduce work hours for family care have long-term financial implications.

While men and women save similarly for pensions early in their careers, the gap widens significantly with time, culminating in women having roughly £60 for every £100 saved by men at retirement. Compounding this, women typically live longer, necessitating more substantial savings for a more extended retirement period.

Empowering women in financial planning

Dispelling the myth that women are less interested in pensions is crucial, as many are now more empowered and proactive in managing their long-term finances. Starting to save early is vital for overcoming gender-specific barriers. Establishing a retirement fund as soon as possible allows small contributions to grow over time. Regularly reviewing pension savings is also essential, ensuring alignment with retirement goals.

Consider increasing pension contributions when receiving a pay rise, especially if employer matching is available. This can significantly amplify retirement savings. Planning for retirement involves more than just financial considerations; it requires envisioning how you wish to spend your time post-retirement. Whether enjoying leisure activities or travelling, understanding these desires helps estimate retirement costs more accurately.

Collaborative planning for couples

If you are part of a couple, joint planning is beneficial. Contributing to each other’s pensions and maximising State Pension entitlements ensures both of you can enjoy a comfortable retirement. Managing pensions can seem complex, but we can provide guidance. We can help demystify pension schemes and build confidence in handling your retirement savings.

Time to plan to ensure you have a financially secure retirement

For further personalised advice tailored to your current circumstances, please contact us. Let us help you navigate these challenges to ensure a financially secure retirement.

Source data:
[1] Royal London’s research is based on nearly two million workplace employees, with a 41% female and 59% male split—data at the end of H1 2024.
[2] The research was conducted between 31 July and 5 August 2024, and 3,693 UK workers had workplace pensions.
[3] https://www.bbc.co.uk/news/business-52660591
[4] https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/ageing/articles/livinglongerhowourpopulationischangingandwhyitmatter03-15

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