When considering gender inequality, many will think of the gender pay gap. However, income discrepancy is only one of many issues and contributes to another staggering problem: the gender pension gap.

Many individuals only consolidate their pension fund once they are near retirement age. Realising you don’t have as much in the bank as you thought can be disappointing and stressful.

But for many women, the realisation is doubled when they find out they aren’t saving nearly as much toward their pension as their male equivalents.

This article discusses what the gender pension gap is, the factors contributing to this disparity, and how the gender pension gap affects working women.

What is the Gender Pension Gap?

The gender pension gap is the disparity between the pension levels of men and women. Independent data has been collected in previous years to understand the difference in pension amounts between the genders and the factors influencing the gap. But in June 2023, the UK government published its first-ever report on the subject.

Using data collected by the Wealth and Assets Survey (WAS) between 2018 and 2020, the government concluded that men have a 35% larger pension upon retirement age than women. This percentage is only slightly smaller (32%) when exclusively considering automatic enrolment.

You might assume that with recent progressive movements to tackle gender inequality, this figure would be decreasing. But unfortunately, the opposite appears to be true.

Trade union Prospect reports the 2021 gap to have hit a staggering 40.5%. This figure indicates that the gender pension gap is increasing at an alarming rate. And it’s vital to understand why this is the case.

Why is there a gender pension gap?

Several factors influence the gender pension gap, making it a complex issue.

The imbalance between men's and women's incomes is a significant contributor. Known as the gender pay gap, the disparity between men's and women's wages is around 5.45%. Those with a lower income will have less contribution towards a pension fund than those with a higher income, leaving women with a lower contribution percentage than men.

Additionally, lifestyle and working differences impact the gender pension gap. The government’s report states the pension discrepancy is lowest for people in their 30s and higher for those aged 40 and over. This could suggest time taken off for childcare is an influential factor.

Another study from Scottish Widows found that women are 72% more likely to be in part-time work than men. This is another factor that points to childcare responsibilities affecting pension amounts. Similar to the gender pay gap influence, part-time workers earn less than full-time workers, which directly affects pension contributions.

It is important to note that reporting may be affected by past circumstances that do not reflect recent changes to legislation. For example, data collected includes pensions of those over the age of 55 who started their career and pension contributions in a different social and economic climate compared to younger generations.

What does the gender pension gap mean for working women?

Thankfully, there are a few positives to report in recent years. According to the UK government, the introduction of automatic enrollment has significantly increased the number of women enrolled in pension schemes. There are also more women than men from low-income households enrolling in pension schemes, again showing progress in women's uptake of pension schemes due to automatic enrollment.

Despite improvements, it does not change the real-life impact of the gender pension gap. Regarding take-home pension amounts, Scottish Widows report that women are retiring with £123,000 less than men.

For working women, retirement planning needs to be more of a priority than their male counterparts.

Starting a retirement fund as early as possible is the most significant way to ensure you save as much as possible for retirement. Sign up for your employer's pension scheme if you still need to.

Understanding the impact of childcare and unpaid maternity leave on your pension fund is vital. Discuss with your partner the best strategy for balancing childcare responsibilities and income, including the effect on pensions and retirement.

Discuss your pension with a financial advisor

If you are unsure about your pension plans and want advice to get the most from your pension savings, speak to an independent financial advisor. Get in touch with our team for confidential pension advice.

Based on tax legislation at the time of publication. Please be aware that there will have been changes since this was published. Speak to your adviser for the most up to date information.