5 simple ways to bridge the gender retirement gap now

A recent government report has found that women reach their 50s with around half (47%) of the pension savings of men. While the gap is lowest for UK workers in their 30s, the gap peaks in employees’ 40s. The gap lessens again in the approach to retirement.

Between 2018 and 2020, the private pension gap narrowed to 35% (from 42% between 2006 to 2008), but the gap is still significant.

There are several reasons for the gap, including:

• Persisting gender inequalities in terms of pay
• The higher proportion of women in part-time work
• Gaps in contributions while on maternity leave or during menopause.

Keep reading for a closer look at the reasons behind the gender pensions gap and how professional financial advice can help to bridge it.

Three key reasons why the gender pension gap exists

1. The higher proportion of women in part-time work

A 2021 Women and Retirement report by Scottish Widows found that 75% of the UK’s part-time workers are women.

Not only will these women take home less pay than their full-time colleagues, but their income could put them below the threshold for auto-enrolment into a workplace pension.

Both of these factors will negatively affect the amount they can contribute to a pension each month.

2. Persisting gender pay inequalities 

The pay gap exists even for women in full-time employment. The Guardian recently reported on official government figures confirming that the UK gender pay gap in 2023 is 9.4% – the same as in 2017/18.

The gender gap is so great that MoneyAge recently confirmed that the average woman would need to work an extra 18 years to amass the same pension savings as an equivalent man.

3. Gaps in contributions while on maternity leave or during the menopause

Typically, the first gap in a women’s contributions will occur when starting a family. And continuing perceptions about gender roles mean that women remain as primary caregivers in many cases, and often, throughout their lives.

As part of International Women’s Day 2023, Leeds Carers confirmed that 59% of unpaid carers in England and Wales are women, while women aged 55 to 59 provide the most unpaid care.

A Royal London Bridging the Gender Pension Gap report, meanwhile, found that among women providing care:

• 26% of women providing unpaid care to a child reduce their working hours
• 20% of women providing childcare want to work extra hours but can’t
• 20% of women providing unpaid care for an adult reduce their working hours.

The same report found that a particularly damaging gap in, or even a ceasing of, pension contributions, can occur when reaching menopause.

Women are much more likely than men to reduce their working hours in their 50s. This is the stage in our career when we are likely to be earning the most, and so contributing the most to our pensions.

Dropping from full-time hours could be costing women £63,000, while around 1 million experience menopausal symptoms that are so severe that they leave work entirely.

Professional advice can help you to bridge the gap and live your dream retirement

1. Start early and plan for the long term

Speaking to a financial planner early can help you to think about the future you want. We can then put a plan in place to help you get there.

The earlier you start saving and contributing the better, allowing more time for potential investment returns and to see the effects of compound growth. 

2. Increase your contributions and make use of “carry forward”

Regular reviews can help to make sure your plans remain on track. We can also use cashflow modelling to help you visualise the effects of changes you make.

If you can afford to increase your pension contributions then you may want to consider doing so. Be aware that you can usually “carry forward” any unused pension Annual Allowance too, possibly from up to three years ago.

3. Up your workplace pension contributions

The pension contributions you make (up to the Annual Allowance) will usually be eligible for automatic pension tax relief at 20%.

Your workplace contributions, though, have the added benefit of a “free” top-up from your employer.

Making the most of auto-enrolment, if you are eligible, could make a real difference in retirement.

4. Shop around when choosing your retirement income provider

An annuity is a guaranteed income for the rest of your life and is only one of several pension options you might choose. If you do opt for a regular annuity income, though, be sure to shop around.

While annuity rates recently hit a 14-year high, the gap between the best and worst rates on the market has also increased.

The far-reaching effects of locking in a poor rate could be huge so be sure to speak to us before you decide.

5. Invest savings to inflation-proof your cash wealth

While UK inflation is falling, it is doing so from a 41-year high, and more slowly than expected.

If you have large amounts of savings sitting in cash, these could be losing their value in real terms and investment might be the answer.

By taking on additional risk, you could see inflation-beating returns, incredibly useful for bridging a gap in your pension provision.

Get in touch

At Logic, we can help you manage your finances, and the finances of your loved ones too.

If you have any questions about how best to help your loved ones manage their finances, speak to us now. Please email us at info@logicfinancialservices.co.uk or check with your adviser.

Please note

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.

Workplace pensions are regulated by The Pension Regulator.