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State Pension – the gender gap is narrowing but what about private pensions?

We offer some top tips on how to beat the gender pension gap.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

It’s a sad reality that, on average, women are not only paid less than men, but they’re faced with a lower retirement income too – the gender pension gap.

Similar to the gender pay gap, the gender pension gap affects lots of women. And the average difference in pension value is huge. Industry research has found that, by their 60s, the average woman’s pension wealth is £51,100 whereas men of the same age have, on average, £156,500. That’s £105,400 more.

Why is the gender pension gap so big?

There are lots of different factors which influence the difference in men and women’s retirement income. Yet unsurprisingly, the gender pay gap has a lot to answer for.

Your earnings normally form the basis of your pension, so the amount you’re paid is likely to have a direct impact on the value of your pension. On average, women currently earn around 17% less compared to their male equivalents. And naturally, as they’re earning less they’re likely to save less.

Under auto-enrolment law employers have to pay into a pension for eligible workers, but only if they earn £10,000 or more a year. Earning above £10,000 could be difficult if you need to work part time or even take a career break. A fall or even a pause in earnings could mean you fall short of the income threshold for pension auto-enrolment.

The shrinking State Pension pay gap

There’s generally been a gap in how much State Pension women and men are entitled to – but thankfully it’s narrowing.

Recent figures published by the Department for Work and Pensions show a dramatic reduction in the gender pension gap between the old and new state pension. For those who reached state pension age before 6 April 2016 and come under the ‘old’ state pension rules, the average male is receiving nearly £164 a week and the average female £136 a week. That’s a gap of nearly £1,456 a year. But for those who come under the new state pension (those who reached state pension age after 5 April 2016), the gap has fallen to around £364 a year.

The knowledge gap – are women in the dark?

Lots of people are completely in the dark when it comes to pensions. However we tend to see an increase in engagement once they have around £5,000 saved.

That being said, women appear to be less engaged than men. This might be because they have smaller pensions. But also as men are on higher salaries on average and take fewer career breaks, they tend to reach the £5,000 level more quickly.

The table below shows the percentage of people who agreed with the below statements from a survey of 2,000 UK adults by Opinium for HL in April 2020.

All Women Men
My pension is invested in the stock market 31% 22% 40%
I have a clear idea of how much all my pensions are worth 36% 28% 45%
I have a clear understanding of my retirement options 31% 24% 38%
I have a clear idea of how much income I’ll need in retirement 29% 23% 36%
I am confident I’ll be able to afford to retire 31% 23% 38%

This article and our online tools aren't personal advice. If you're at all unsure please take advice. Tax and pension rules can change and any benefits will depend on your circumstances.

How to beat the gap

Keep your pension contributions up

If you take a career break or reduce your hours and have a partner, you could speak to them about keeping up your pension contributions. On a lower salary, or no salary at all, pension payments can be an easy target to cut from your budget. Your other half might be able to pick up some of the slack by paying into your pension on your behalf. Even if you’re a non-earner they can pay in up to £2,880 for you and you’ll get up to £720 in tax relief from the government on top.

Once you pay money into your pension, you won’t normally be able to access it again until at least age 55 (rising to 57 in 2028).

More on pension contributions

Make your pensions work as hard as you do

Paying in more to your pension isn’t the only way to help grow your pot. You can get the money already in your pension working harder by choosing to invest it in the stock market.

The further you are away from retiring, the longer you’ll have to wait to access anything you put in. But it also means your money will have more time to grow and by investing into the stock market, it can help it grow that little bit quicker.

You might already be an investor and not even know it. Lots of workplace pensions are invested in a ‘default fund’. This fund is usually chosen with the ‘average investor’ in mind but this might not be right for you, so make sure you check you’re happy with it.

You might want to look at other investments alongside your default fund. Choosing a number of investments can help you diversify and spread risk.

Remember, all investments, including a default fund, will fall as well as rise in value so you might not get back what you originally invest. It’s important that you’re comfortable with where and how much you’re investing.

If you’re new to investing explore our online guides and videos to help you kick start your pension.

Find out more

Beat the gap

For more top tips on how to beat the gender pension gap, download this essential factsheet.

Download factsheet

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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