Pension gap: At 55, women have saved just under £100,000 and men nearly £150,000
Women reach age 55 with a third less saved into private pensions than men, a new government report reveals.
The gender pension gap is 35 per cent, or a slightly smaller 32 per cent among people who are auto-enrolled into work schemes, according to the first official measure of the issue from the Department for Work and Pensions.
Previous industry research has consistently shown women have far smaller pensions than men, as lower pay and unpaid caring work hit their ability to save for old age.
Today, pension experts welcomed the signals from current Pensions Minister Laura Trott that the issue is on the Government’s agenda.
The new figures show that at 55 – the age at which savers can first tap private retirement pots – women have saved just under £100,000 and men nearly £150,000 into private pensions. That is after those who have saved nothing are excluded.
The pension gap of 35 per cent for 2018-2020 has narrowed from 42 per cent in 2026-2008.
However, it has fluctuated over the past decade after auto enrolment led to an an influx of low-earning women into workplace pensions.
‘Increasing the number of low-earning people who save into a pension increases the number of people with a small amount of pension wealth,’ says the DWP.
Gender pension gap: NMPA stands for normal minimum pension age, which is currently 55 for people accessing private retirement savings
This means the pension gap can increase even while women are increasing their private pension wealth, it notes.
The DWP found that women eligible for auto enrolment paid £52billion into their pensions in 2021, compared with £62.6billion saved by men.
‘It’s a known fact that women, on average, earn less than men, consequently limiting the amount they can save towards a pension,’ says Megan Rimmer, chartered financial planner at Quilter:
‘Moreover, women often have differing work patterns throughout their lives as compared to men frequently due to childcare responsibilities.
‘Recent data indicates that among adults aged 16 to 64, the male employment rate in 2022 was 79 per cent, whereas the female employment rate was 72 per cent really illustrating this point.’
Women, on average, earn less than men, consequently limiting the amount they can save towards a pension
Rimmer says the Government’s extension of its policy providing 30 hours of free childcare should help decrease the pension gap usually arising from women taking extended periods off work to care for children.
She also welcomed its recent commitment to fix state pension gaps for parents – mostly women – who have not claimed child benefit because they weren’t eligible to receive the payments.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, says: ‘he structural problems that derail women’s pension planning are all too clear.
‘The gender pension gap is at its smallest between the ages of 35-39 at 10 per cent. Among the AE-eligible population women’s pension wealth is higher in their 30s.
‘However, once they hit their forties it unravels as the mix of time out of the workforce, lower pay and part-time work does its damage.
‘The gap widens to 47 per cent for the 45-49 age group. For the auto enrolment-eligible population it hits 33 per cent for the 40-44 age group.’
What’s the difference between defined contribution and defined benefit pensions?
Defined contribution pensions take contributions from both employer and employee and invest them to provide a pot of money at retirement.
Unless you work in the public sector, they have now mostly replaced more generous gold-plated defined benefit – or final salary – pensions, which provide a guaranteed income after retirement until you die.
Defined contribution pensions are stingier and savers bear the investment risk, rather than employers.
Laura Myers, a partner at LCP, says the DWP’s publication of the statistics represents a vital first step in tackling profound gender inequalities in pensions.
‘Laura Trott is to be commended for getting this work done within months of coming into office.
‘Not only does this report put the issue firmly on the government’s agenda, but it means we will be able to hold governments to account to make sure that progress is made on the yawning gap in pension rights between men and women.
‘Although good progress has been made in recent years in reducing the gender gap in state pensions, the gap in defined contribution pension rights between men and women is steadily growing, and risks replicating the inequalities we saw in the defined benefit world.’
Gail Izat, workplace managing director at Standard Life, says: ‘The gender pension gap is still way too high – we simply shouldn’t still be seeing such a huge discrepancy between men and women’s retirement savings as we move towards the mid 2020s.
‘The pay gap is a major contributing factor, and there’s also the fact that women are more than three times as likely as men to work part time, often as a result of taking on the majority of caring responsibilities within a family.’
Izat adds that current Government moves to enable people auto enrolled to save from the first pound of earnings should help, as a higher proportion of women than men fall below the current £10,000 starting position.