“Women have 35% lower pension pots when they hit retirement age compared to men, showing the huge gulf in pension savings between the two. On average it means that for every £100 a man has in his pension, a woman has just £65.
“When we drill down into the numbers, it’s not a lack of participation on women’s part, the number contributing to a pension is high. Looking at just auto-enrolment participation women are consistently more likely to be paying into a pension than men. And in fact, when women are in their 30s the gender pension gap is at its smallest, at 10%. But once they hit their 40s and above women significantly drop behind men in their pension savings. A lot of this will be due to women taking career breaks to have children, working part-time around caring responsibilities or the gender pay gap meaning they earn less – which all filters through to lower incomes and lower pension contributions.
“This is highlighted in the average contribution rates, which show women are paying 25% less into their pension than men in the public sector and 26% less in the private sector. For example, in the private sector on average men are contributing £2,010 a year to their pension in comparison to £1,500 for women. What’s more, the figures don’t include those people who have no pension wealth when they hit retirement age – which would make the gap even larger, as women are more likely to have absolutely no pension than men.
“However, the figures are based on those hitting retirement age in 2018 to 2020, and working practices have changed a lot from when these individuals started out in their careers. There are sources of optimism for the future – auto-enrolment has worked very well at getting more women, in particular, to save into their pension. However, a lot of these women have lower earnings, dragging down the average pension pot sizes. So more women are saving, but they are also saving small sums because their earnings are smaller, which reduces the median pension pot size for women.
“Overall, women’s pension pots are growing though. In the 2006 to 2008 set of data the average female had a pension pot worth £50,000 at retirement, compared to £85,000 for men. But in this latest 2018 to 2020 dataset women’s pension pots at retirement have shot up almost 90% to £94,000 – but men’s have also soared, albeit by a smaller 70%, to £145,000.
“There are lots of ways women can boost their retirement savings – as logically they should actually have larger pots than men when they hit retirement age, as they are statistically more likely to live longer and so need their pension pot to last longer.
“From maintaining pension payments during maternity leave, to increasing contributions if you return to work part-time, or boosting contributions before you go off, there are lots of ways to ensure a career break doesn’t leave a huge hole in your pension savings. There’s also lots of evidence to show that women don’t ask for pay rises as often as men, and a bigger income means bigger pension contributions. Even for those who have got healthy pension savings, previous data shows that women are less likely to take as much investment risk as men with their pots – which can harm long-term returns.”
AJ Bell’s Money Matters campaign was launched almost two years ago with the aim of helping women get more comfortable with their finances and to help narrow the gender investment gap.