Bridging the Gender Pension Gap: Why Private Savings Still Lag Behind
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There’s been some positive progress when it comes to pension equality. Recent government data shows that the gender gap in state pension income has almost disappeared for new retirees. That’s great news. But it only tells part of the story.
When it comes to private pensions – those built up through workplace schemes or personal contributions, the gender gap remains wide. In fact, research by the Department for Work and Pensions shows that women aged 55 to 59 hold, on average, 48 percent less in defined contribution (DC) pension savings than men in the same age group
That means for every £10,000 a man has in pension savings; a woman of the same age typically has just £5,200. And since many people now rely heavily on private pensions to fund their retirement, that difference can have a real impact on financial freedom in later life.
If you’re a woman in your 40s, 50s or early 60s, and you’re thinking ahead to retirement, this is an important gap to be aware of, and one that can still be closed with the right actions.
Why does this gap exist?
There are several reasons why women’s pension savings are often lower:
Career breaks: Women are more likely to take time out of work to care for children or elderly relatives. During these periods, no income often means no pension contributions.
Part-time work: Women returning to work after a break are more likely to work part-time. If you earn below the threshold for automatic pension enrolment, you may not be enrolled at all.
Lower pay: On average, women are still paid less than men, which naturally leads to smaller pension contributions over time.
Less investment risk: Studies show women often take a more cautious approach to investing, which can result in lower growth in the long term.
The good news is that with some planning and advice, there are simple steps you can take to improve your retirement savings outlook.
1. Consolidate old pensions into one plan
It’s very common, particularly if you’ve changed jobs or worked part-time, to have several small pension pots scattered across different providers. This can make it hard to track your overall savings, see how your investments are performing or plan effectively for retirement.
Bringing your pensions together into a single plan can help you:
· Understand exactly how much you’ve saved
· Reduce duplicate charges across providers
· Improve investment options and flexibility
· Make retirement income planning simpler
Of course, before transferring any pension, it’s important to check if any valuable guarantees could be lost. For example, older pensions might offer protected tax-free cash or guaranteed income benefits. But for many people, especially those with smaller pots, consolidation can be a smart move.
2. Make the most of employer contributions
Even small increases in your regular contributions can make a big difference over time, especially if your employer offers to match them.
For example, some employers will contribute 5 percent if you do the same, rather than the basic 3 percent. That extra 2 percent from both you and your employer can compound over time to significantly boost your retirement fund.
If you’re earning less than the auto-enrolment amount, you can still ask to join your employer’s scheme, but they may not contribute.
3. Keep contributing during career breaks – if you can
If you’re taking time out of work, whether for childcare, caring for relatives or other reasons, you can still pay into a pension, even if you have no income.
Non-earners can contribute up to £2,880 per year into a pension, and the government will top this up to £3,600 with tax relief. This can be a tax-efficient way to keep your pension on track during a career break, especially if you expect to return to work later
For couples, another option is a spousal contribution, where one partner pays into the other’s pension. This can help equalise retirement savings and may also offer tax advantages depending on your individual circumstances.
4. Don’t underestimate the power of starting early, or catching up later
It’s easy to put pension planning on the back burner, especially when there are other financial pressures like childcare costs, mortgages or supporting children through university. But whether you’re 35 or 55, it’s never too early or too late to make a difference.
For example, according to Scottish Widows’ 2023 Women and Retirement report, a 40-year-old woman earning £30,000 who increases her pension contributions from 5 percent to 10 percent of her salary could increase her pension pot at retirement by over £85,000.
If you’re closer to retirement, a review of your current savings, projected income and available options including ISAs and other investments can help you plan more confidently.
Looking ahead
The near closure of the gender gap in the state pension is a positive step, but for most people, the state pension alone won’t be enough for a comfortable retirement. The shortfall in private pensions still poses a risk, but it’s not one you have to accept.
With the right advice, many women can take control of their financial future, grow their pension savings and enjoy greater independence in later life. Whether it’s reviewing your pension plans, improving your contributions, or planning around career breaks, small steps today can make a big difference tomorrow.
If you’d like to understand more about your own pension position and how to improve it, we’d be happy to help. Please get in touch to arrange a review and explore your options.