While minimal progress on the gender pay gap has been hard-won, another inequality continues to deepen in its wake: the gender pension and wealth gap. Largely avoiding mainstream media discussion, it hides in plain sight, leaving millions of women in the UK facing a poorer and less secure retirement.
According to Scottish Widows, the UK is at least 20 years away from closing the gender pensions gap unless decisive action is taken. With women on track to retire with pension savings around £100,000 less than men, the issue is structural, persistent and increasingly urgent.
Current picture: the stubborn 30% gap
Scottish Widows’ Women and Retirement report – which has tracked women’s retirement savings for two decades – shows that while progress has been made, the gender pension gap in overall projected retirement income remains at around 30%.
Other figures contained in the report are equally stark. The average woman can expect £12,000 a year in retirement income, after tax and housing costs, compared to £17,000 for the average man. That figure not only highlights inequality but also falls below the Pensions and Lifetime Savings Association (PLSA) minimum standard of £14,400 for a single person.
The participation gap is equally concerning. Only 56% of women are on track to receive retirement income from a private pension, compared to 68% of men. Fewer still – just 49% of women – are on track for retirement income from long-term savings, compared to 61% of men.
Among people aged 50 to 64, women’s private pension pots remain a third smaller than men’s, even though the gap has narrowed from 52% to 33% since 2008.
Research by the Department for Work and Pensions found that wealth among those aged 55 to 59 stood at £81,000 for women versus £156,000 for men – a 48% gap in private pension wealth.
In the UK, the Pension Policy Institute reports that the gap between average under-pensioned incomes and the population average has grown since 2018, with women’s average annual incomes now at 80% of the population average and just two-thirds of men’s.
Underlying causes: structural and behavioural barriers
The drivers behind the gender pension gap mirror those of the pay gap, but their cumulative effect over time makes the pension divide even harder to close.
Career breaks remain the most visible cause. Women who take two one-year breaks in their 30s could retire with around 10% less pension savings than those with continuous careers, according to Barnett Waddingham’s analysis of 35,000 DC scheme members.
To make up that shortfall, a woman would need to increase contributions by one percent of pay at age 35 – or six percent if she waits until 55.
Part-time work and low pay are also culpable. Women are still far more likely to work in lower-paid or part-time roles, often below the £10,000 auto-enrolment threshold. According to the TUC, around 1.4 million women miss out on auto-enrolment altogether.
However, it must be said that auto-enrolment has played a part in addressing the problem: since its introduction in 2012, it has effectively doubled pension participation rates among eligible female employees, bringing an additional 4.6 million women into pension saving.
However, inertia is an obstacle. Barnett Waddingham found that over 90% of employees stick to default contribution rates – levels too low to ensure adequacy in retirement.
“The less you have, the less you can save,” observes Melissa Blissett, associate and pay gap analytics lead at Barnett Waddingham. “Auto-enrolment has been a success, but too many people treat it as the finish line rather than the start.”
Women’s greater longevity exacerbates the issue; they live longer but retire with less, meaning smaller pots need to stretch further. To make matters worse, Barnett Waddingham research shows women underestimate their longevity by an average of seven years, making inadequate planning a compounding problem. Scottish Widows warns that 42% of women are on track to fall below the minimum retirement income standard, compared to 35% of men.
The result of these intertwined factors is a growing divide in retirement outcomes.
As John Mullally, group risk and healthcare consultant at Cartwright Employee Rewards, explains: “We’re at risk of creating two tiers of pensioners – those with adequate private pensions who can use the state pension as a top-up, and those who rely almost entirely on the state and may need to work longer just to get by.”
Employer role: from education to structural change
Here’s the good news: employers can play a crucial role in narrowing the gap, both through fair pay practices and targeted pension policies.
At Scottish Widows, retirement expert Susan Hope argues that employers should make better use of salary exchange arrangements to maximise savings. “It’s the best way to boost both take-home pay and pension wealth – and it has a halo effect on financial confidence,” she says.
Other concrete steps employers are taking to reduce the gap include paying pension contributions on full-time equivalent salaries during maternity or shared parental leave, and maintaining employer contributions even when parents return part-time – a practice known as employer-funded contribution maintenance. This ensures that career breaks and reduced hours do not permanently erode pension savings.
Others offer equal paternity and maternity pay, enabling couples to share leave more flexibly and allowing mothers to return to work earlier without financial penalty. As Mullally observes, this shift in parental leave policy is beginning to change the dynamics of who takes time off work. “When both parents have equal pay during leave, it can make greater financial sense for the woman to stay in work,” he notes, resulting in higher lifetime earnings and pension contributions.
A growing number of organisations are introducing auto-escalation schemes, where pension contributions automatically rise by around one percent of pay each year or aligned with pay increases. While the increment is small, Barnett Waddingham’s research shows it can significantly improve retirement outcomes – and if increases are timed with pay rises, employees should not see a decrease in take-home pay.
Flexible working policies, particularly the ability to work from home, are also playing a role. As Mullally points out, practical support through flexible arrangements is enabling women to work more hours and make higher pension contributions than might otherwise have been possible.
Hope, meanwhile, recommends that employers use data to track differences and design solutions, targeting pension communications around key life moments such as maternity, divorce, return to work and menopause. “This is when women are more likely to make important financial decisions,” she explains. “A more focused approach will see better savings as a result.”
Blissett also emphasises the importance of education, and adds that succession planning is an often-overlooked angle for employers. “If employees can’t afford to retire, it blocks progression – particularly for women in the pipeline. That’s a gender equality issue too.”
Policy developments: the case for reform
While employers can make a meaningful difference, experts agree that policy reform is essential if the gender pensions gap is to close within a generation.
Scottish Widows’ head of pension policy, Pete Glancy, calls for the government to work hand-in-hand with employer bodies and trade unions to promote employment practices where men and women can share caring duties equally. He also urges policymakers to recognise that property wealth plays an under-acknowledged role in women’s retirement security, particularly after divorce or widowhood.
Barnett Waddingham’s Bridging the gap report sets out a comprehensive reform agenda, including:
- removing or lowering the £10,000 auto-enrolment threshold and including multiple job income when assessing eligibility;
- lowering the auto-enrolment age from 22 to 18 – which Scottish Widows estimates could increase the future pension pot of an average 18-year-old woman by £47,000;
- moving to a flat rate of pension tax relief; and
- allowing couples to pay into each other’s pensions.
Where next?
Despite the complexity of the issue, there is broad consensus on what needs to change.
Blissett sets out a trio of priorities for employers:
- Measure your gender pension gap;
- Integrate it into your gender pay gap action plan; and
- Review your pension contribution policies during maternity leave.
Jackie Leiper, managing director at Scottish Widows, believes that only bold, coordinated action can deliver parity. “We’ve seen real progress – auto-enrolment and pay transparency have been game-changers – but we’re still a long way from where we need to be. Without drastic action, the gap could take another 20 years to close.”
And for Mullally, the ultimate test will be whether the UK’s pension system evolves to reflect modern working life. “We’ve moved far beyond the model of the male breadwinner and stay-at-home wife. But our pension framework hasn’t kept pace. Until it does, women will continue to be at a disadvantage.”
The challenge now requires real intent. As Hope warns: “The gender pensions gap isn’t just a problem for women – it’s a problem for society. If we fail to act, we entrench inequality for decades to come.”
