The gender pensions wealth gap for private pensions stood at 35 per cent from 2018 to 2020, although there is a smaller 32 per cent gap among people who are auto-enrolled.
According to figures from the Department for Work and Pensions, published today (June 5), the gap of 35 per cent for private pensions has narrowed from 42 per cent in 2006-2008.
In 2021, around £52bn was paid into the private pensions of women eligible for automatic enrolment compared with £62.6bn into the pensions of men.
The ‘gender pension gap’ measures the difference in the amount of private pension wealth held by men and women at around ‘normal minimum pension age’ – currently 55.
It is calculated before the pension has been accessed and excludes people who have zero pension wealth.
Commenting on the data, minister for pensions Laura Trott, said: “The success of automatic enrolment has transformed the UK pensions landscape and brought millions of women into pension saving for the very first time. However, while the participation gap has closed, the wealth gap persists.
“The publication of an official annual measure will help us track the collective efforts of government, industry and employers to close the gender pensions gap and ensure women can look forward to the retirements they’ve worked so hard for.”
Laura Myers, who is a member of LCP’s gender pension gap working group, said: “The publication of these statistics represents a vital first step in tackling profound gender inequalities in pensions, and Laura Trott is to be commended for getting this work done within months of coming into office.
“Not only does this report put the issue firmly on the government’s agenda, but it means we will be able to hold governments to account to make sure that progress is made on the yawning gap in pension rights between men and women.”
By age group, the gap is smallest for those in their thirties (10 per cent), peaks for those in their forties (47 per cent), before falling back at older ages.
DWP said that this pattern is "similar to the trajectory of the gender pay gap".
Kate Smith, head of pensions at Aegon, said regularly measuring the gender pensions gap should help to inform the impact of future pensions policy, such as the improvements to auto-enrolment and wider public policy.
“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,” she said.
Since the introduction of auto-enrolment, the real term increase in total pension savings for women is more than £4bn higher than for men.
Between 2008 to 2020, pension wealth for the average woman increased from £50,000 to £94,000 by the minimum private pension age.
In contrast, between 2008 to 2020, pension wealth for the average man increased from £85,000 to £145,000.
Becky O'Connor, director of public affairs at PensionBee, said “there is far more to it” than having a pension through work and argued that the government data suggests there is not really a gap until workers reach their thirties, suggesting the problem is almost entirely down to when people hit their child-raising years and need to take some time out of paid work.
“It is therefore policy in this area, such as equal pay for new mothers and fathers, that probably requires the most attention if we are to close the gap,” she said.
2016-2018 | 2018-2020 | |||||
Average pot size male | Average pot size women | Gender pension gap | Average pot size male | Average pot size women | Gender pension gap | |
16 to 24 | £1,000 | £2,000 | -100.0% | £4,000 | £2,000 | 50.0% |
25 to 29 | £5,000 | £6,000 | -20.0% | £8,000 | £5,000 | 37.5% |
30 to 34 | £14,000 | £12,000 | 14.3% | £14,000 | £10,000 | 28.6% |
35 to 39 | £34,000 | £21,000 | 38.2% | £25,000 | £23,000 | 8.0% |
40 to 44 | £50,000 | £40,000 | 20.0% | £52,000 | £31,000 | 40.4% |
45 to 49 | £81,000 | £55,000 | 32.1% | £88,000 | £46,000 | 47.7% |
50 to 54 | £117,000 | £80,000 | 31.6% | £100,000 | £78,000 | 22.0% |
55 to 59 | £131,000 | £78,000 | 40.5% | £145,000 | £94,000 | 35.2% |
60 to 64 | £98,000 | £59,000 | 39.8% | £121,000 | £68,000 | 43.8% |
65 to 69 | £75,000 | £54,000 | 28.0% | £108,000 | £50,000 | 53.7% |
70 to 74 | £96,000 | £28,000 | 70.8% | £90,000 | £34,000 | 62.2% |
75+ | .. | .. | £100,000 | £30,000 | 70.0% | |
Source: ONS
Interactive Investor calculations found that women’s pension wealth would reach £80,960 between age 45 to 49, if their pension wealth continued to increase at the same rate as men between ages 35 to 49, compared to £46,000 in reality.
This means women pay a £57,960 motherhood penalty on average in their 40s, as childcare costs and the gender pay gap kick in.
Alice Guy, head of pensions and savings at Interactive Investor said: "Women have lower pension wealth than men at every stage of the journey, but a small gap often becomes an unbridgeable chasm for women in their 40s as a modest 8 per cent gender pension gap increases to 40 per cent for women aged between 40 to 44 and 48 per cent for women aged 50 to 54.”
Guy said women often “bear the brunt of childcare and household chores” and are more likely to work part time in their 40s.
“If women have children, the odds are stacked against them as some of the highest childcare costs in Europe combined with an increasing gender pay gap, make it harder for them to build pension wealth,” she said.
“When you’re struggling to pay the bills, lifting your head up and saving for the long term can seem an insurmountable hurdle, but it’s worth remembering that even small extra amounts paid into your pension add up over time.
“If you’re older and your kids have flown the nest, then it can make sense to up your pension contributions.”
Contributing an extra £200 per month from the age of 50 could add up to £64,104 by the time you reach 67, assuming 5 per cent investment growth.
Laura Suter, AJ Bell’s head of personal finance at AJ Bell added there are lots of ways women can boost their retirement savings – as logically they should actually have larger pots than men when they hit retirement age, as they are statistically more likely to live longer and so need their pension pot to last longer.
“From maintaining pension payments during maternity leave, to increasing contributions if you return to work part-time, or boosting contributions before you go off, there are lots of ways to ensure a career break doesn’t leave a huge hole in your pension savings,” she said.
Suter said there is also lots of evidence to show that women don’t ask for pay rises as often as men, and a bigger income means bigger pension contributions.
“Even for those who have got healthy pension savings, previous data shows that women are less likely to take as much investment risk as men with their pots – which can harm long-term returns," she said.
sonia.rach@ft.com
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