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Gender pension gap revealed

  • June 7, 2023
  • 3 min read
Gender pension gap revealed

Women’s private pension pots in the UK are worth around 35% less than those of their male colleagues by the time they reach 55. This is according to the first major government study into what is being referred to as “the great gender pension chasm.”

Having analysed data for both sexes from 2018 to 2020, researchers concluded that for every £100 accumulated in men’s private pension, women have an average of just £65. As a result of the imbalance, women could end up losing thousands in retirement income.  

Lower overall earnings, time off for childcare and other caring duties, and the greater number of women in part-time work are thought to be among the factors that women’s pension pots are just two-thirds the size of men’s.

Several reports have been published in recent years on the gender pension gap but this is the first time that the government has calculated the true scale of the issue. The gap varied for different age bands and was lowest for people in their 30s which suggests that time off for childcare was a big factor. For workers eligible for automatic enrolment, the gap shrinks, currently standing at 32%. Overall, it rises to 47% for those aged 45-49.

The study also found a gap in contributions made by men and women. In 2021, around £52 billion was paid into the private pension of women eligible for automatic enrolment. By comparison, £62.6 billion was paid into men’s pension. This is a gap of 17%.  

It is “less of a gap, more of a gaping chasm” according to Helen Morrissey, the head of retirement analysis at Hargreaves Lansdown. “The government recently announced childcare reforms which should help more women keep working and contributing to their pensions, but the gender pension gap looks set to remain with us for some time yet,” she said.

Laura Suter, the head of personal finance for investment platform AJ Bell, said that the figures show that once women reach their 40s, they dropped behind men in their pension savings. “A lot of this will be due to women taking career breaks to have children, working part-time around caring responsibilities, or the gender pay gap meaning they earn less – which all filters through to lower incomes and lower pension contributions.”

The figures do not include people who have no pension wealth when they reach retirement age which Suter says would make the gap even bigger as women are more likely to have no pensions.

“The success of automatic enrolment has transformed the UK pensions landscape and brought millions of women into pension saving for the very first time,” pensions minister, Laura Trott, said. 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.”

 

 

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