Women and the pension and savings gap; how can women improve their security in retirement?

We hear a lot about the gender pay gap, but one area that’s often overlooked is the knock-on effect this has for retirement savings. While progress has been made, on average, women are reaching retirement age with far less put away than their male counterparts.

3 min read

With women generally earning less than men during their careers, along with them taking the more tradition roles of childcare and other caring responsibilities which could mean working part time or perhaps sacrificing promotion, it is no wonder there is a widening gap when it comes to pension accumulation. Three million women are effectively “locked out” of workplace pension saving because they do not meet the £10,000 auto enrolment eligibility criteria1.

Many women approaching retirement are facing a confidence conundrum and are the most anxious about being able to afford a comfortable retirement yet are the least likely to consider alternative funding options to plug the gap.

Average retirement income

Research undertaken by NOW:Pensions shows that women are now getting to retirement age with significantly less in their pension pot than men; £69,000, compared with £205,8001.

One stark finding in the research is that for women and men to achieve a more equitable pension wealth would require women to work an additional 18 years. Or to look at it a different way, either start work at the age of four, or work until they were 83!1

With women typically earning less over the course of their careers, more likely to work part-time or need to juggle their career and caring responsibilities, the gender pay gap quickly becomes the gender pension’s gap at retirement. There is no quick fix to this situation, but it does illustrate how important it is to consider all your assets at retirement.

Gender pension’s gap

Planning your finances for retirement is important for everyone – but especially those who are either facing into the impact of the gender pension’s gap or find themselves retired and struggling on less than the minimum income standard may find professional advice helpful so that they understand their options.

Making the most of your income in retirement is about knowing your options and getting good advice will ensure you consider how assets such as the equity you have in your home might allow you to live a more comfortable and fulfilling retirement.

Increasing attention is now being given to the ‘gender pension gap’ – the fact that on average women have lower private pension wealth and lower income in retirement than men. This inequality is the result of many interconnected and complicated factors relating to society, employment, childcare, education, and individual bias.

Is the pension and savings gap affecting you?

There are many reasons why women are saving less. One of the key factors is that women are more likely to take a career break or work part-time, especially when they have young children. Only 27% of women work mainly in full time roles during their careers, compared to 45% of men1, indicating women are nearly twice as likely to be employed on a part-time basis than men. As a result of disrupted work patterns, career gaps and part-time working– this can impact women’s ability to save consistently for retirement without savings gaps.

When looking at these differences, the focus is often on the short-term financial impact. However, the long term, and what it means for retirement, is just as important. There are some steps women can take to improve their financial security later in life.

1. Start saving into a pension as soon as you can

Retirement saving can seem challenging. The goal sum you want to achieve at retirement may be large. However, you’ll be saving this over your entire career. Spread out across decades, the amount can seem less daunting. It’s never too late to start saving into a pension, but it’s never too early either.
The sooner you start saving into a pension, the better the position you’ll be in. To achieve the same goal, your regular contributions will be less. You’ll also have longer to benefit from potential investment returns, boosting your retirement fund further.

2. Take some time to review your pension arrangements

Under auto-enrolment, those workers who meet the criteria will now be automatically enrolled in their Workplace Pension scheme. It’s worth taking some time to understand what you’re contributing, what your employer is contributing, and how pension investments are helping these contributions to grow. Your pension provider will also provide a pension forecast, showing an estimate of what your pension is expected to be worth at retirement. It can help you see if you’re on track.

You may also have pensions from previous employers too. Review these alongside your latest one. In some cases, it makes sense to consolidate pensions into a single pot, making your savings easier to manage.

3. Speak to your employer

Speaking to your employer can help you understand the benefits on offer.

For example, if you’re not eligible for auto-enrolment, your employer may still offer you a Workplace Pension scheme if you speak to them. There may also be other options for improving your long-term financial security, such as a salary sacrifice scheme that will increase pension contributions. However, you should be aware that reducing earnings via salary sacrifice can impact entitlement to income related employer and Government benefits and may not be appropriate for your circumstances.

Under auto-enrolment, if you contribute to a Workplace Pension scheme, your employer must also contribute to it. This is currently 3% of pensionable earnings. However, some employers will increase this if you increase your contributions too. As a result, it can be worthwhile increasing your own contributions to benefit from this.

4. Continue contributing even when you’re not enrolled in a Workplace Pension

You don’t have to be part of a Workplace Pension scheme to continue adding to a pension. Whether you’re taking a career break or aren’t eligible for auto-enrolment, setting up your own contributions can help close the gap and keep retirement plans on track.

You can choose to open a Personal Pension or contribute to existing schemes, such as old Workplace Pensions. Even small, regular additions to your pensions can add up over the long term and improve your retirement prospects. You can also choose to add a lump sum to pensions.

5. Weigh up the pros and cons of diverting savings into a pension

When we think of financial security, it’s often the short-term we focus on, it’s not surprising that pensions can be an afterthought.

However, there are benefits to saving in a pension if you have long-term goals. You will receive tax relief on your pension contributions. That means an extra 20% will be added if you’re a basic rate taxpayer, and more if you’re a higher or additional rate taxpayer. It gives your savings an instant uplift. As pension contributions are invested, they also aim to deliver long-term returns.

If you’re in a position to do so, diverting money from your usual savings into your pension can make sense. However, you need to keep in mind that your pension money will not be accessible until you’re 55, rising to 57 in 2028. As a result, you need to be in a secure financial position and have an emergency fund in place before doing so.


1 June 2022 | NOW:Pensions | The Gender Pensions Gap Report 2022

Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content was accurate at the time of writing. Whilst information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may impact on the accuracy of the article.

This information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change and tax implications will be based on your individual circumstances.