Women’s private pensions were worth 35% less than men’s between 2018-2020, the latest figures from the Department of Work and Pensions have revealed.
The gender pensions gap is marginally smaller at 32% when considering only those who are eligible for automatic enrolment.
In its first report on the gender pensions gap, the government said that the gap varied according to age, with the gap smallest amongst those aged 35-39 (10%) and highest (47%) for those aged 45-49. However, the DWP said the gap decreases later in life, similar to the trajectory of the gender pay gap, which shows a relatively small gap until the age of 40.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, called the gender pensions gap a “gaping chasm.”
Morrissey said: “The gender private pension gap is 35% – less of a gap, more of a gaping chasm. It is shrinking, it was once as high as 42%, but it is still way too high. There is room for optimism though, for the auto-enrolment eligible population the gap is slightly smaller at 32% so we can hope that gap continues to close as more women save into workplace pension schemes.
“However, the structural problems that derail women’s pension planning are all too clear. The gender pension gap is at its smallest between the ages of 35-39. Among the AE-eligible population women’s pension wealth is higher in their thirties. However, once they hit their forties it unravels as the mix of time out of the workforce, lower pay and part-time work does its damage.
“The government recently announced childcare reforms which should help more women keep working and contributing to their pensions, but the gender pension gap looks set to remain with us for some time yet.”
Kate Smith, head of pensions at Aegon, echoed the sentiment: “It’s just not acceptable that the gap sits at 35%, meaning many women are lagging far behind their male counterparts when it comes to retirement provision.”
Smith said regularly measuring the gender pensions gap should help to inform the impact of future pensions policy, such as the improvements to auto- enrolment as well as wider public policy such as the recently announced expanded free childcare for all under 5s.
“The world of pensions is constantly evolving and it is helpful to track the gender pensions gap, specifically within the population eligible for auto-enrolment, as well as separately for those with defined benefit and defined contribution pensions. This will provide greater insights into the underlying causes of the gap, why it has changed over time and how to address it going forward,” added Smith.
Megan Rimmer, chartered financial planner at Quilter, said differing work patterns among men and women have driven the sharp disparity in pension savings and said the provision of free childcare should go some way to creating more of a balance.
“It’s a known fact that women, on average, earn less than men, consequently limiting the amount they can save towards a pension. Moreover, women often have differing work patterns throughout their lives as compared to men frequently due to childcare responsibilities.”
In 2021, the total annual contribution into workplace pensions for AE-eligible female and male employees was £52 billion and £62.6 billion, giving a contribution gap of 17%.
Rimmer continued: “The government’s extension of its policy providing 30 hours of free childcare should provide a significant boost in addressing this issue. By making childcare more accessible, the shared responsibilities between partners could potentially decrease the gender pension gap that usually arises from women taking extended periods off work to care for children.
“Even though women currently earn less than men, this discrepancy over a working life can contribute to a more pronounced difference in pension wealth by the time they approach retirement. This is largely due to a larger proportion of men’s earnings qualifying for pension contributions, with women being disproportionately impacted by earnings thresholds and qualifying earnings limits for auto-enrolment.”
Rimmer said the government’s recent pledge to rectify issues surrounding parents who have not claimed Child Benefit, and therefore at risk of missing out on the full state pension, were a welcome and encouraging step forward.
She added: “Such initiatives are essential in advancing towards a more equitable state pension system but the private sector still has a long way to go before it closes the pensions gap.”
