The gender pensions gap reaches 55% by the time a woman retires, according to analysis from insurer Legal & General, with the average pension pot of a woman at retirement less than half that of a man.
Looking at data from 2021, L&G found that the gender pensions gap is 16% at the start of a woman’s career, a single percentage point lower than it was in 2020. This rises to 31% in women’s forties and 51% in their fifties.
L&G also compared the size of retirees’ pension pots and found a stark difference between men and women. In 2021, the average size of a man’s pension pot was £26,000, compared with £12,000 for a woman.
The company attributed the persistent gap to the fact women are still paid less and less likely to be in senior leadership, meaning they contribute less into pension schemes. They are also more likely to take career breaks for childcare or caring responsibilities, leaving periods without contributions.
Many women do not return to work after maternity leave, or work part time, due to the high cost of childcare, it said. L&G also pointed out that around 900,000 women in the UK retire early each year due to menopause.
Gender pensions gap
Last year, research by the OECD found that women in member countries receive around a quarter less income than men from the pension system.
Katharine Photiou, commercial director of workplace savings, said not enough solutions were offered to women to overcome these challenges.
“It’s time women stop being penalised for things outside of their control, like the high cost of childcare, or being paid less than their male counterparts,” she said.
“We know that women feel significantly less confident, and are more likely to struggle on knowing where to start, when it comes to making financial decisions. Industry and government must therefore work together to ensure education and engagement around savings and investments increase.
“For example, too few know about the flexibility that couples have in being able to contribute to their partners’ pension while they are on parental leave. This is something that can significantly reduce a women’s pension shortfall.”
In January, the company submitted a number of recommendations to the Work and Pensions Select Committee as part of its pension freedoms consultation.
Its suggestions included reducing the eligibility age for pensions auto-enrolment to 18 and removing the £10,000 salary eligibility trigger. It would also like to see greater flexibility for couples to pay into each other’s pensions, and greater power for part-time workers to increase their savings potential.
Stuart Murphy, co-head of defined contribution at L&G, said there needed to be greater cross-industry collaboration to close the gap.
“In our view, encouraging full disclosure to highlight the scale of the issue is an important starting point,” he said. “We are calling for full disclosure from companies and DC pensions providers to publicly share their gender pension gap so that we can better identify and fix this problem.
“We are also making a call for regulators and lawmakers to look at reform; including dropping the minimum age of auto-enrolment, abolishing the auto-enrolment minimum salary threshold and provide further support to help families with childcare costs.”