Gender pension gap widens in the wake of the pandemic

The gender pension gap has grown by over £26,000 in the last year, pushing the average gap between the amount men and women receive from their pensions to more than £180,000 over the course of their retirement, according to new research.

The research, conducted by equity release lender more2life and the Centre for Economics and Business Research (Cebr) found that men expect an average retirement income of £20,712 a year from their pensions, while women estimate that their annual income will be around £14,964. Taking the difference in life expectancy into account, women could end up missing out on as much as £183,936 over the course of their retirement compared to men.

While the pandemic has definitely exacerbated the situation, the gender pension gap is far from a new problem. For a number of women, a lifetime of lower wages, as well as them taking career breaks to raise families or care for parents has left them with significantly lower pension savings. Separate research by professional services consultancy Barnett Waddingham found that a woman taking two 12-month career breaks in her early 30s, with no increase to her pension or salary during this time, could end up with 10% less in her pension pot at retirement compared to a woman who hasn’t taken any career breaks.

Despite women often being better at saving into their pensions than men –  women on average save 9.4% of their income into their pension, versus 8.3% for men – it would take an average of 14.5 years of additional working and saving for women to catch up with men.

One of the biggest issues is that women in their over 50s often have the least resilience to redundancy and unemployment, meaning that they have less opportunity to continue building their pension pot. While huge numbers of people were furloughed during the pandemic, our research shows that while furlough rates have dropped in other age groups, one in three of all furloughed employees are now over the age of 50. When this is combined with an increase in unemployment rates for women aged 65 and over, the news of the widening gender pension gap is a worry for many.

It’s not all doom and gloom however, there are a number of things that anyone with a smaller pension pot can do to start building it up. Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said:

“These figures are concerning and back up our own research showing women are struggling to recover financially in the current environment as a result of redundancy and furlough. Our research showed 62% of women worried about being able to afford to pay enough into their pension in comparison to 57% of men.

“However, there are things that women can do to plug the gap. It’s not too late to make a difference to your pension value by continuing to contribute after the age of 55. You should also check with your employer to see if they will match any further contributions as this can give your retirement planning a real boost.  State pension and benefits also form an important part of your retirement income and so you should check what you are entitled to and whether there are any gaps that need to be filled.”

For more information on the gender pension gap and ways you can mitigate the impact of it, read our article Women and the gender pension gap. If you’re not sure whether you’re saving enough for retirement, our article How much should I save for retirement? may help.

If you’re not sure whether you’ve saved enough into your pension, or you don’t fully understand where your money is being invested, you might want to speak to an independent financial adviser who can recommend the best course of action based on your individual circumstances.

You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guides on How to find the right financial advisor for you or How to get advice on your pension.