It can be easy to bury your head in the sand when it comes to retirement, especially if it seems a long way off. But if you want to live comfortably when you decide to stop working, it’s crucial to plan ahead.
This is especially true for women who are on track to have significantly less money in their pension pot than men by the time they retire.
To mark International Women’s Day 2024, investment platform interactive investor has revealed three shocking facts about the gender pension gap:
1. By 45 men are on track for a bigger pension pot in retirement on average, even if they make no more contributions AND women keep contributing eight per cent of their salary for another 20 years
2. Women need to contribute 22 per cent of their salary from age 45 to match the average man by retirement age
3. Women need to pay in £213 per month more than men from age 45 to match their pension pot by retirement age
A woman’s pension pot at age 45 is on average almost HALF (48 per cent) that of a man’s pension pot, according to government data on the gender pension gap. At this point, men having £88,000 in their pension on average, compared to £46,000 for women.
The gender pension gap is largely driven by deep-seated structural issues. The gender pay gap is a big factor, as, naturally, when women earn less, they have less to save. Women are also more likely to take time out of their career or work part-time to care for children and later, elderly relatives.
The gap also grows over the years because of investment compounding, where interest earns interest on itself (in other words, the more money you have, the more it grows).
How the gender pension gap grows
| Gender pension gap | Men | Women | Gap | % gap |
| Pension wealth at aged 45 | £88,000 | £46,000 | £42,000 | 48% |
| Pension wealth at 68 with no more contributions | £270,294 | £141,290 | £129,004 | 48% |
| Pension wealth at 68 with 8% contributions | £412,172 | £242,604 | £169,568 | 41% |
| Pension wealth at 68 with 22% contributions | £662,057 | £419,451 | £242,606 | 37% |
| Assumptions: Five per cent annual investment growth net of fees, based on pension gap data at 45-49 and additional investment for 23 years up to retirement age, using ONS earnings data for median salary – £34,810 for men and £24,683 for women | ||||
The Good Guide to Financial Wellbeing for Women
Alice Guy, Head of Pensions and Savings at interactive investor, says: “By mid-life a huge pension gap has already opened up by between men and women, and it’s an uphill struggle for women to make up the difference. Women often take time out from the workplace in their 30s and 40s to care for young children and that has a huge knock-on impact on pension wealth later on.
“It’s a double whammy for women – not only do they earn less on average, but investment compounding works in favour of those who have bigger pots in mid-life. Amounts saved in your 20s and 30s are worth their weight in gold as investment returns mean they snowball over time.
“The stark reality is that men in their 40s are already on track for a bigger pension pot in retirement even with no more contributions. And if men do continue paying in, women need to contribute a massive 22 per cent of their salary to catch up by retirement.”
The good news is that there are actions you can take to help close the gender pension gap. The ideal amount to be putting away is 15 per cent of your salary (a combination of what you and your employer pay in, plus any tax relief), but even if you can’t manage that, every little bit makes a difference, especially if you get started today.
Alice says: “Even smaller amounts of extra pension saving make a big difference by the time it comes to retirement. Saving just £50 more each month for 30 years could add over £50,000 to your pension wealth in retirement.”
