Gender pension gap is 35%

Written by Lori Campbell on 5th Jun 2023

Women have a THIRD LESS than men saved into a pension at age 55, a new government report reveals.

Outside the state pension, pensions come in mainly two forms – private and workplace – and women are being let down on both fronts.

The gender pension gap is now 35 per cent for private pensions, and 32 per cent for people who are auto-enrolled into work schemes, according to the first-ever analysis into the issue by the Department for Work and Pensions (DWP).

At age 55, the age when pension savers can first access private retirement pots, women have saved £94,000 while men have set aside nearly £145,000. The research excludes those who have saved nothing, which could mean the real gap is even larger as women are more likely to have no pension at all than men.

‘The motherhood penalty’

The findings back up industry research that has long shown that women have substantially smaller pension pots than men. As well as being paid less than men, women are more likely to take time off work to care for children or elderly relatives, or to work part-time. This greatly reduces their ability to save for retirement.

The gender pensions gap is smallest for those aged 35-39 (10 per cent) and steadily increases to a huge 47 per cent for those aged 45-49. It then decreases again in the later years of working life. The pensions gap is also compounded by an investment gap between men and women. Last year men at £599 billion more invested than women – that’s greater than the GDP of Switzerland. 

Calculations by investment platform interactive investor (ii) show that women in their 40s are paying a £58,000 pension “motherhood penalty.” It says women’s pension wealth would reach £80,960 between age 45 to 49, if their pension wealth continued to increase at the same rate as men between ages 35 to 49, compared to £46,000 in reality.

The Good Guide to Pensions

Alice Guy, Head of Pensions and Savings at ii says, “Women have lower pension wealth than men at every stage of the journey, but a small gap often becomes an unbridgeable chasm for women in their 40s as a modest eight per cent gender pension gap increases to 40 per cent for women aged between 40 to 44 and 48 per cent for women aged 50 to 54.

“Women often bear the brunt of childcare and household chores and are more likely to work part time in their 40s. If women have children, the odds are stacked against them as some of the highest childcare costs in Europe combined with an increasing gender pay gap, make it harder for them to build pension wealth.”

The pension gap of 35 per cent for 2018-2020 has narrowed a little from 42 per cent in 2006-2008. However, it has been influenced over the past decade after auto enrolment led to an an influx of low-earning women into workplace pensions. The DWP says: “Increasing the number of low-earning people who save into a pension increases the number of people with a small amount of pension wealth.”

The contributions gap

The study found that women eligible for auto enrolment paid £52 billion into their pensions in 2021, compared with £62.6 billion saved by men – a contribution gap of 17 per cent.

“On average.. for every £100 a man has in his pension, a woman has just £65,” says Laura Suter, head of personal finance for investment platform AJ Bell.

“When we drill down into the numbers, it’s not a lack of participation on women’s part, the number contributing to a pension is high. Looking at just auto-enrolment participation women are consistently more likely to be paying into a pension than men.

“But once they hit their 40s and above women significantly drop behind men in their pension savings. A lot of this will be due to women taking career breaks to have children, working part-time around caring responsibilities or the gender pay gap meaning they earn less – which all filters through to lower incomes and lower pension contributions.”

Make equal pension wealth your new life goal: download our Good Guide to Financial Wellbeing for Women

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