Mind the gender pensions gap

Employers can help get to a place where both men and women are on track for appropriate pension pots.

September isn’t just about back to school and the return of pumpkin spiced lattes – it’s also the month to Pay Your Pension Some Attention. It’s great that we’re thinking about our future financial fitness. But there’s another aspect of pensions deserving of our attention – one that often goes unnoticed in campaigns like these: the gender pensions gap.

Fundamentally, the gender pensions gap is about the differences in retirement income or retirement wealth for men and women. It can be the differences in pension wealth at different ages, differences in pension income received, or even the difference in state pension income.

The fact is that, when it comes to pension saving and getting financially fit, men have a huge advantage over women. Sticking with the fitness theme, if pension saving is a light jog around the park for men, for women, it’s the equivalent of running a marathon with a weighted body suit. And if that sounds like an exaggeration, let’s dig into the numbers.

Men’s pension pots are almost double

The most recent research from the government reveals a stark gender pensions gap of 48% for those approaching retirement. For women aged 55-59, this means a median private pension wealth of just £81,000 compared to men’s almost doubled amount of £156,000. In terms of annual retirement income, that means that men get roughly £5,000 a year more than women throughout retirement.

Now, you might be thinking that the issue is worse for those already approaching retirement – after all, things weren’t so equal back then as they are today. In reality, though, this is an ongoing crisis – the gender pensions gap begins right at the start of people’s careers.

For those in 16–24 age group, the gender pensions gap is already at 26%. Then, by the time women have reached their 40s, the gap has doubled and continues to increase further towards retirement age.

What’s causing the gender pensions gap?

There are all sorts of reasons why the gender pensions gap exists. The first one is staring us in the face: the gender pay gap.

Unfortunately, women are, on average, still paid less than men and are less likely to be in senior leadership positions. This results in lower pay and, therefore, lower pension contributions and ultimately less pension savings.

The other big factor is that, when the time comes to start a family, women are more likely to be the primary caregivers and to take time off from their careers for childcare. Women are five times more likely than men to be out of paid work to look after children, elderly or disabled family members, according to the TUC.

How do we close the gap?

While campaigns encouraging employees to save more and track down missing pensions play an important role, the underlying challenges are fundamentally systemic. They need coordinated action across employment policy, childcare provision, pension system design, and workplace practices.

But employers have a strong role to play here. Of course, the biggie action is to look at close the gender pay gap but there are a few additional key areas to focus on that could make a big difference:

1. Look at who’s not in the pension scheme

The £10,000 earnings trigger can be a real barrier to getting women saving into pensions. It doesn’t take into account the reality that some people have multiple part-time and lower-paying jobs – more likely to be women - which means they never get auto enrolled.

But through communication and education, the employer could encourage lower earners to voluntarily join the scheme. We are still waiting for the 2017 auto enrolment reforms to be implemented but when they do, this could make a huge difference to lower earners as pension contributions will be calculated from pound one.

2. Look at parental leave policies

Maintaining pension contributions during parental leave based on full salary, rather than reduced statutory pay, can help prevent the wealth gap from opening during career breaks. Some forward-thinking employers are implementing gender-neutral family leave policies that give families more flexibility around caring decisions without inadvertently penalising pension savings.

3. Review your approach to flexible working

When roles are designed with flexibility in mind from the start – and hiring managers understand how to make this work – you’re creating employment patterns that naturally support more consistent pension contributions throughout different life stages.

4. Educate employees

Provide financial education specifically targeted at women to help them understand the impact of career breaks on their pension savings and what they can do to make up for lost contributions.

Divorce is another big education gap. Some women maybe unaware that their pension can be shared and could waive their claim to their partner’s pension.

The bottom line

The gender pensions gap isn’t going anywhere without decisive action. While awareness campaigns matter, they can’t solve structural inequality on their own. The good news is that employers don’t need to wait for government intervention to make a difference.

The tools exist, the business case is clear, and the solutions are within reach. We need to start doing the right thing for our employees and move towards a reality where both men and women are on track for an appropriate pension pot when needed.

That’s not just good for gender equality – it’s good for business, good for productivity, and good for society. Let’s work together to close the gender pensions gap.