6 stepping stones to help you cross the gender pension gap

Published: 21 Aug 2023 Last updated: 26 Feb 2024

Jumping across the gender pension gap is about recognising what it may look like for you and finding the steps through.

Sometimes, a gap can be good. A gap year for travel and exploration could be a chance to discover the world before taking on more studies.

But there are some gaps that aren’t doing women any favours. The gender pension gap, or the difference between how much men and women can pay into their pension, is one. Our recent Working Lives report finds that the gender pension gap begins to widen significantly from the age of thirty-five.^{Footnote [1]}

This imbalance carries on into retirement with women 60-65 years old having pension pots which are, on average, just over half (57%) the size of men’s pots at the same age.^{Footnote [1]}

Surely, for women in the workforce today, this gap is narrowing. Right?

Our research shows that women are significantly more likely than men to say that their pension won’t give them enough money for a comfortable retirement (33% of women versus 25% of men).”^{Footnote [1]}

The first step in squashing this gap is to learn more about it and to find the steps to jump across.

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3 steps to seeing the gap

Connect the gaps – pension pots (different from investments like ISAs) hold an amount of money you’ve saved for retirement, which is often paid in through your salary and sometimes your employer. So, it stands to reason, that how much you earn will directly impact your pension. And here’s where one gap leads to the other.

The difference in pay between men and women is largest between people who get paid more. It’s also the widest between people who are full time employees aged 40 years and older.

This means that, on average, women have less salary to put into their pension and that’s before accounting for career breaks, maternity leave (during which time some women opt out or decrease pension contributions), caring responsibilities and more part-time roles.

The good news is that the gender pay gap is narrowing. But it’s doing so slowly. In the past decade, it only fell by around 25% among full time employees.
The family gap – In 2019, 59% of women were contributing into a pension compared with 66% of men which means that, at the end of the year, men put in an average of £3,400 into their pension while women put in £2,600. Also, the difference in how much money women versus men put into their pensions, widen significantly after women have children.

And when it comes to divorce, 15% of divorced people didn’t realise their pension could be affected and more than one third (34%) made no claim on their former partner’s pension. As a result, as many as one in five (19%) say they will be, or already are, significantly worse off in retirement.
Some gaps are closing – back in the day, although not that far back, “men used to receive significantly more state pension income than women, but that gap has almost closed for people reaching state pension age in recent years,” says a recent study. Although women in the early 1940s received around 25% less in state pension income than men on average, this gap is below 5% for those born in the early 1950s.

But, there’s still a historic gap. The average weekly amount of state pension benefit paid to men in November 2022 was £177.61 while for women it was £155.65.

The pension gap may seem overwhelming, but there are things you can do to help narrow the gap.

6 stepping stones to help you across

Get proactive – if you’re earning £10,000 or less, then you may not be enrolled in your workplace pension. Speaking with your employer and asking to be enrolled is an important first step. If a workplace pension isn't an option, you could consider a stakeholder pension, which is designed for people on lower incomes, or look at starting a personal pension. Another option is a self-invested person pension (SIPP), which lets you choose your own investments. It requires a bit of knowledge of financial market, so you'll need to be comfortable with doing some research.

If you’re now thinking about how the gender pension gap may affect your children in the future, there are also Junior SIPPs. These are personal pensions managed for a child, to help kick start their retirement savings as early as possible. Both SIPPs and Junior SIPPs have tax relief benefits.

The value of a pension can fall as well as rise and you could get back less than invested. Tax rules are subject to change and are dependent on individual circumstances.
Get in – if you’ve opted out of your workplace pension, opt back in (if you can). If you can't then consider starting a personal/stakeholder pension.
Get talking – having (sometimes) difficult conversations around money is part of being an adult (so we’ve been told). Talking to family members, like your partner or parents, when a change in lifestyle or situation happens (think maternity, caring responsibilities, or career breaks) may help your pension build as you review your options and make decisions to encourage your pension growth. We may not want to think or chat about it, but separation and divorce may be a reality for some. Should this happen, it’s important to keep pensions at the forefront of your mind when splitting assets.
Get giving – put a little more into your pension, if you can afford it.
Get in early – start paying into your pension as early as possible. Small contributions add up over time.
Get checking and applying – check your National Insurance record to see if you’ll get the full State Pension amount when you retire. You need a total of 35 years of National Insurance contributions or credits.

Also, for the State Pension, apply for National Insurance credit if you’re eligible. Credits can help to fill gaps in your National Insurance record, to make sure you qualify for certain benefits, including the State Pension.