While the gender pay gap often makes headlines, the pensions gap has grown largely unnoticed.
Today, women in the UK retire with, on average, 35% less private pension wealth than men, according to the Department for Work & Pensions. This statistic is a stark reflection of a lifetime of structural disadvantage. From part-time work and career breaks to lower average earnings, women face a number of pension penalties.
The largest ever gender pension disparity was in 2006, when the gap soared to 42%. However, if it continues at its current rate of decline, the gap will take a century to close completely. And, while automatic enrolment has improved participation, it hasn’t solved the problem.
The system wasn’t built for women
The UK’s pension architecture was designed in an era when the ‘typical’ worker was male, working full-time, without any career breaks. But today’s workforce tells a different story. The gap is driven by a complex mix of structural, behavioural, and policy-related factors. Here are some of the primary causes:
Lower pay: Women earn less on average than men, leading to lower pension contributions throughout their careers.
Part-time and flexible work: Women are more likely to work part-time or in flexible roles, which often come with lower pay and may fall below pension auto-enrolment thresholds.
Career breaks for caring responsibilities: Time taken off for maternity leave or caregiving often results in missed pension contributions and slower career progression.
Pension scheme participation and design: Women are less likely to be in ‘defined benefit’ schemes (where the pension provider will guarantee you a certain amount each year when you retire, regardless of how much is contributed) and many pension plans don’t accommodate non-linear career paths.
Divorce and pension splitting: While it is a legal requirement that pensions must be considered, many divorcing couples choose to overlook or undervalue them, sometimes due to their complexity or to a focus on other assets. This can lead to unfair outcomes for women, particularly if they have been the primary caregiver or had less income during the marriage.
Lower investment engagement: According to the Institute for Fiscal Studies and Nuffield Foundation, women are statistically less likely to invest in higher-growth assets outside of pensions, limiting long-term wealth accumulation.
Longer life expectancy: Women live longer on average, requiring more retirement savings, but often retire with less.
Why employers must act
Automatic enrolment has been a step forward, but it’s not enough. Equal participation doesn’t mean equal outcomes when the system is still calibrated to a male-centric model of work and saving.
Employers are uniquely positioned to drive meaningful change. Pensions are more than a benefit; they reflect how much you value the long-term financial security of all your employees. Addressing the gender pensions gap is the right thing to do, but it’s also a strategic move that enhances retention, engagement, and brand reputation.
Here are five actions employers can take today:
1. Top-up contributions during leave
Career breaks for maternity, adoption, or shared parental leave often coincide with a complete halt or significant reduction in pension contributions. This can have a lasting impact on women’s retirement savings, compounding over time into a substantial financial disadvantage.
Employers can play a pivotal role in addressing this by offering enhanced pension contributions during these periods of leave. For example, continuing to contribute based on the employee’s pre-leave salary - even when they are on reduced or no pay - helps maintain pension growth during critical life stages. Clear communication of this benefit is essential, ensuring employees understand its long-term value and feel supported during their time away from work.
2. Review auto-enrolment thresholds
The current auto-enrolment threshold in the UK excludes employees earning less than £10,000 a year from being automatically enrolled into workplace pension schemes. This disproportionately affects women, who are more likely to work part-time or in lower-paid roles. Organisations can take proactive steps by voluntarily enrolling all employees into pension schemes, regardless of their earnings.
3. Flexible pension schemes
Women are more likely to have non-linear career paths, often involving part-time work, career breaks, or transitions between roles. Traditional pension schemes are not always designed to accommodate these realities.
To address this, employers can offer more flexible pension arrangements. This might include allowing employees to make catch-up contributions later in their careers, providing portable pension plans that follow employees across different roles, or enabling more adaptable contribution schedules. This flexibility would empower employees to build pension wealth in a way that aligns with their individual career journeys, rather than penalising them for stepping off the traditional path.
4. Transparent communication
According to the Financial Conduct Authority, women are more likely than men to have low financial resilience, which includes lower confidence in managing money and planning for the future.
Employers can help bridge this gap by providing clear, accessible, and jargon-free pension education. This should be tailored to different life stages and working patterns, for example, early-career employees, new parents, or those approaching retirement.
Hosting interactive workshops, webinars, or one-on-one sessions can further enhance understanding and engagement. It’s also important to use inclusive language and visuals to ensure all employees feel represented and supported. When employees are well-informed, they are more likely to engage with their pensions and make decisions that support their long-term financial wellbeing.
5. Data-driven accountability
Without data, it’s difficult to identify where pension disparities exist or whether current policies are effective. Employers should consider conducting regular audits of pension participation, contribution levels, and outcomes by gender and employment type. This data can then be used to inform internal policy changes, set measurable goals, and track progress over time.
Sharing these insights transparently with leadership and employees builds trust and reinforces a culture of accountability. By turning good intentions into measurable outcomes, employers can lead with integrity and drive meaningful change in closing the gender pensions gap.
Closing the gender pensions gap isn’t just a government responsibility, it’s a business imperative. Forward-thinking employers who act now will not only futureproof their workforce but also lead the charge in building a more equitable society.
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