The gender pension gap. What is it and what can employers do to help?

26 February 2024
Clare Moffat, our pension expert, discusses our recent research into the gender pension and wealth gap, and how you might be able to support your employees.

You’ve probably heard about the gender pay gap, but have you heard about the gender pension gap? In recent years, there’s been significant progress in reducing the gender pay gap and promoting gender equality in the workplace. Despite this progress, women continue to face unique challenges when it comes to retirement planning and achieving financial security in retirement.

What is the gender pension gap?

The gender pension gap is the difference between men and women’s pension wealth. It can be measured in relation to pension savings that men and women have at different points in life, or the difference in the amount of income that men and women have in retirement.

Whichever measure is used, one thing that is clear. Women retire with significantly less pension savings than men.

A recent survey by the Department for Work & Pensions, found that the gap in private pensions is currently 35%1. This means that for every £100 a man has in pension savings, a woman will only have £65. As women tend to live longer than men, and their pension savings need to last longer, this is a real concern.

Why does the gender pension gap exist and what’s the link to the gender pay gap?

The gender pension gap is the result of several factors. One of which is the gender pay gap – the difference between the average hourly earnings for men and women. There are historical reasons the gender pay gap exists such as fewer women being in the workforce, unequal pay and breaks in employment due to caregiving responsibilities.

Legislation has helped to equalise pay and as a result the gender pay gap has decreased over the years. However, women often work in lower paid industries, and lower pay, usually means lower pension contributions.

But the gender pension gap isn’t just about lower pay, and this is reflected by the fact that the gender pension gap isn’t reducing as quickly as the gender pay gap.

We carried out research in Autumn 2023 to understand and identify the main causes of the gender pension gap.

The key areas where differences between men and women were identified were in relation to financial confidence, breaks in unemployment while providing care, either as a parent, grandparent or caring for elderly relatives, the impact of menopause symptoms, and divorce.

We also considered financial resilience. Women have fewer assets than men to fall back on if they can’t work. And statistically, a 30-year-old women is around 42% more likely than a man to be off work for 2 months or more2.

Policy changes by the government may be needed to help drive a reduction in the pension gap, but this won’t happen overnight. In our report we’ve considered what actions can be taken to help women, and what employers could do to help their employees now.

You can read our full report here.

Why should employers care?

As an employer, it’s important to recognise the significance of the gender pension gap and understand the benefits associated with closing it. By actively addressing this issue, employers can create a more inclusive workplace and demonstrate a commitment to gender equality and building long term financial resilience.

Helping to close the gender pension gap will ultimately help reduce the very real risk of poverty among women in what should be their golden years.

How can employers help?

Through our research, we identified a number of steps employers can take to reduce the gender pension gap. The key overarching theme? Education.

Educating employees on managing their money and retirement planning, particularly early on in their careers, can help them feel better equipped to make good financial decisions as their lives grow and change. Sharing educational content that’s inclusive and easy to understand, at key life stages, can help build your employees’ financial confidence.

Pensions can seem very far off to someone in their twenties, but explaining the benefits of contributing to a pension, or the effect of delaying, reducing or even stopping contributions can help employees understand the importance of saving into a pension early, and the long-term financial benefit.

You’ll find further recommendations in our report.

Closing the gender pensions gap will take time to solve and needs the input of society as a whole. But small steps taken by employers now, could have a big impact on their employee’s financial resilience both today, and in the future.

1 Department for Work & Pensions, The Gender Pensions Gap in Private Pensions, 5 June 2023

2 Both aged 30, non-smokers, planned retirement age of 65. *Pacific Life Re, June 2021. These figures have been produced based on their interpretation of the Institute and Faculty of Actuaries’ Continuous Mortality