Despite significant progress having been made in closing the gender pay gap in recent years, millions of women are still on course to end up with much less in their pensions than men.

The first major government review in 2023 of the gender pension gap looked at the amount that both women and men saved between 2018 and 2020 into their private pensions, and found that for every £65 women saved, on average, men managed to put away £100. This makes a substantial difference to the amount they are able to build up by the time they reach retirement age. Read more in our article Women’s pensions are a third lower than men’s.

According to separate analysis from Now Pensions and the Pensions Policy Institute (PPI), women face a £136,000 shortfall at retirement age, and will need to work an additional 19 years to close the gender pension gap. It found that by the time women reach 67, the State Pension age, they will have average pension savings of £69,000, which is £136,000 less than the average man, who will have saved £205,000 over the same time period.

For women to retire with the same amount of money in their pension savings as a man, these findings mean they would need to work and save for an extra 19 years on average.

The gender pension gap a subject that has impacted, and will continue to impact, the lives of millions of women and, understandably, causes huge stress for so many.

Here, we explain in more detail what the gender pension gap is, the issues that have created it and what can be done about it.

If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.

The consultation is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.

What is the gender pension gap?

The gender pension gap is the difference between the amount held in pensions by men and women.

The gap is most prominent for women who have taken a career break, often to raise a family or care for elderly relatives. During this time, it is often impossible to afford to pay into a private pension, and women in this position will need to claim either Child Benefit or Carer’s Allowance to provide their National Insurance Credits to ensure they get as much State Pension as possible.

For many people their pension income is made up of 51% state pension and 49% private pension. While not all men experience the considerable pension wealth we outline above, there is a larger proportion of women who have very little in either their private or State Pension pots.

Why does the gender pension gap matter?

The gender pension gap is something that directly affects millions of women across the UK and is putting them at an increased risk of facing poverty during their retirement years.

The gap itself is not a new problem, and in the past it was more likely to be bridged by shared pension income with a partner, but there are a number of factors that make it a bigger risk now than in the past. These include changing pension schemes, fewer people owning their homes by the time they retire, an increase in divorce rates and a high proportion of women outliving their partners. When these factors are combined, the gap is increasingly becoming a major concern for women approaching retirement, and who may not be able to rely on financial support from a partner or husband.

It is an issue that crosses generations. The gap often begins in earnest when a woman is in her 30s, as this is often the time that women take time off to raise a family. Many women’s pension pots do not recover from this time, with PPI data showing that there are currently 1.2m women in their 50s who have no private pension wealth. While there are things a woman can do to try and mitigate the impact of the pension gender gap there is no structural protection against this at the moment.

The pensions landscape has changed over recent years and women have been heavily impacted by the changes, both from increases in state pension age and changes to the minimum threshold for auto enrolment. There are concerns that women are disproportionately suffering and while there are charities and organisations that are focusing on this issue, there is currently no legislation in place to protect their interests.

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How has the gender pension gap come about?

The reasons behind the gender pension gap are numerous and complicated, but some of the main reasons for it include:

1. Different working patterns between men and women

In the UK, there is a heavy, and often unspoken, dependence on women for unpaid work such as childcare or caring for relatives. This means that while more women are now working than 40 years ago, only one in five women in the UK currently works full time, according to research by the London School of Economics. Instead, many choose to work part-time, or in flexible roles that give them time to care for their children or relatives.

While statutory paternity leave was introduced in 2003, and Shared Parental Leave in 2015, there is relatively little support both from companies and society as a whole for the uptake of these, with as little as 2% of eligible couples opting for Shared Parental Leave.

The impact of these different working patterns means that women are often lower paid, might not qualify for their workplace pension scheme, or have gaps in their private pension contributions. They may also not accrue enough National Insurance qualifying years to provide them with a full State Pension

2. The gender pay gap

Although, as previously mentioned, much has been done to help narrow the pay gap between men and women, women still are generally paid less than men, with the UK gender pay gap currently sitting at 14.9%. There are, of course, always exceptions to the rule, but historically this means that women have been unable to save as much into their pensions as men.

The difference in working patterns has a knock-on effect for the pay gap, with many women undertaking part time roles, there are certain lower paid occupations which are over-represented by female employees, such as administration, cleaning and caring.

As with the pension gap, the reasons behind the gender pay gap are complicated and while it is now closing as a result of regulations introduced in 2017, for many women who have already reached retirement age, or are heading towards it, these initiatives are unlikely to make a difference.

3. Participation rates

Historically, women have not participated in workplace pension schemes as often as men. The reasons are twofold. For a long time there was inequality in the schemes available to men and women, and often women didn’t qualify to be part of the scheme, which has had an impact on current retirees. Additionally, given women were typically on lower incomes, participation in a pension scheme may have previously been of less interest.

The introduction of auto enrolment in 2012 has improved participation rates further, and there is a hope that workplace and private pension pots will account for the majority of people’s pensions by 2050. Although many women who work part-time may not meet the minimum income of £10,000 to qualify for auto enrolment, it is still possible to join your company scheme if you want to. You can find out more about this in our article Can I join my workplace pension scheme if I’m on a low salary?

What is being done to close the gender pension gap?

While closing the gender pay gap has been enshrined in law, there is not currently any legislation addressing the gender pension gap.

In January 2021, a motion was tabled by 60 MPs to examine the gender pension gap and its impacts and begin conversations on how to close it. The motion recognises that while gender equality in social security is the goal, there needs to be recognition that women are not protected during some key stages of life and that the current pension system is not geared towards women’s lives.

While this motion is in the earliest stages of being brought before parliament, and may be too late for those aged in their 50s, 60s and beyond, there are a number of things that you can do to boost your pension pot, and if you have retired, find support to help you make ends meet.

How can you boost your pension?

If you haven’t yet reached retirement age and are worried about having a small pension pot, there are things youcan do to boost your pension savings.

If you have no retirement savings, our article Saving into a pension for the first time can provide you with some information on how to start building your pension pot.

If you are self-employed, your pension options can be confusing. Our article Self-employed pension options explained provides guidance on how you can save for the retirement you want if you work for yourself.

If you are in a relationship and you are not working or are taking a career break, your partner may be able to contribute to your private pension pot. Our article Can my husband or wife pay into my pension – or can I pay into theirs? explains how to do this.

If you’re not sure whether you have enough saved for your pension or don’t fully understand your pension pots, you might want to speak to an independent financial adviser who can recommend the best course of action based on your individual circumstances.

What can you do if you can’t save enough into your pension?

If you aren’t able to save enough into a pension then you will probably need to rely on the state pension for financial support during retirement. The full state pension is £203.85 a week in the current 2023/24 tax year, which works out to just over £10,600 per year, but not everyone will qualify for this full amount.

To be eligible for the full state pension, you will need to have paid 35 ‘qualifying years’ of National Insurance Contributions. A qualifying year is a year where you have been in work and earning above a minimum amount which means you will automatically have paid National Insurance. You can also get a qualifying year by paying voluntary National Insurance if you were self-employed, gaining National Insurance credits from certain benefits, or earning enough to meet the lower earnings threshold (this gives you the benefit of paying National Insurance without having to actually pay it).

If you do not have enough qualifying years, you are able to buy them in retrospect. To do this you will need to buy ‘voluntary class 3 NI contributions’ to make up your record. You can buy up to 10 years’ contributions and the rate is £17.45 per missing week of NI contributions, so it’ll set you back £907.40 for a full year. This will boost your pension by £5.82 a week, or around £302.85 a year.

You can find more information on the State Pension in our article How the State Pension works.

Check if you were contracted out

If you’re intending to rely on your State Pension as your primary source of income when you retire, it’s important to check whether at any point you were contracted out of the Additional State Pension, otherwise known as the State Earnings-Related Pension Scheme or SERPS.

Before April 2016, it was possible for employees to contract out of the Additional State Pension. This meant paying lower or redirected National Insurance contributions over the years and effectively accepting lower or zero Additional State Pension as a result. If you did contract out of the Additional State Pension, then when you retire, you’ll instead get a contracted-out pension from your employer’s workplace pension scheme.

This is typically the same as or more than you would have got if you didn’t contract out, although the actual amount you’ll get will depend on how your pension has performed and it could be that you end up with less than you hoped.

If you spent time contracted out and qualified for the State Pension before 6 April 2016, you’ll be getting less or no additional state pension. If you qualify for the state pension on or after 6 April 2016 you’ll get a lower ‘starting amount’.

Check if you’re eligible for any benefits

It’s worthwhile checking whether you might be eligible for any benefits which you can use to supplement your State Pension. For example, Pension Credit is a means-tested benefit which you may be eligible to claim if your weekly income is below a certain level. Claiming Pension Credit may provide you with access to a range of other benefits such as help with housing costs, council tax or heating bills, so it’s well worth finding out if you qualify. Find out more in our article Pension Credit explained.

If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.

The consultation is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.

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