Gender pension gap hits 46% for women in midlife, and 45% for younger women

• The gender pension gap stands at £89,000 for women aged 55-64 with pension savings
• The gender pension gap is rising, up from 25% in 2016 to 46% in 2022 for women aged 45-54 with pension savings
• Younger women are also struggling to build pension savings, with a 45% gap opening up for pension savers aged 25-34
• Despite the success of auto-enrolment, 8.7 million women still have no pension, compared to 6.5 million men

interactive investor (ii) analysis of recent ONS pension wealth data reveals a stubborn gender pension gap with women struggling to build pension wealth throughout their working life. This gap has remained consistently high for the past 10 years.

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Camilla Esmund, senior manager, interactive investor, says: "Despite strides forward in workplace equality, and the success of auto-enrolment, women in the UK are still retiring with significantly less financial security than men. Today’s stark data reveals that auto-enrolment alone isn’t enough to bridge the gap. Greater engagement is needed.

“Women still face multiple and systemic hurdles when it comes to building pension wealth. They are more likely to work part-time or take time out of the workplace to care for loved ones, leading to a lifetime of lower contributions and the potential for a smaller pension pot in retirement.

"Efforts to close the gender pay gap have fallen short when it comes to pension wealth. The wealth divide is even larger than the income gap because wealth compounds over decades. Even a small income gap early in a career can translate into a massive wealth gap by retirement."

Data for pension savers

ONS data reveals a persistent gender pension gap across pension savers of all ages. 

• Women aged 25-34 already have 45% less pension wealth on average than men, reducing to 30% for women aged 35-44 before climbing to 46% for those aged between women aged 45 to 64.
• The gender pension gap is increasing among those with pension wealth, rising from 25% in 2016 to 46% in 2022 for women aged 45-54 and 36% to 46% for women aged 55-64.

Average pension wealth among pension savers between 2020 - 2022

Source: Median pension wealth for those with pension wealth based on ONS pension wealth data.

Gender pension gap among pension savers

Assumptions: Gender pension gap those with pension wealth, based on median pension wealth

Camilla Esmund, interactive investor, explains: “While the gender pay gap has narrowed to 7% among full-time workers, this masks a deeper systemic issue. The pay gap, across all workers, currently stands at 13%, largely due to the higher number of women working part-time. Additionally, millions of women are out of work due to caregiving responsibilities. In late 2023, 25% of working-age women were economically inactive, compared to 18% of men in the same age group. The real gender pay gap is therefore far higher than 13%, with a significant knock-on impact on women’s retirement wealth."

When it comes to the impact on younger pension savers, Esmund says: “Worryingly, there is a growing gender pension gap among younger women, with those in their 20s and 30s already experiencing a stark gender wealth divide. This suggests that we could see an even bigger gender pension gap in the future.

“Without research and data reflecting the true realities of pay and retirement planning, we won’t be able to address the gap meaningfully and risk perpetuating gender inequality for future generations.” 

Those with no pension at all

interactive investor calculations, based on ONS pension data, also reveal that one in three women still have no pension at all, compared to one in four men, despite rising levels of pension participation since 2012, when auto-enrolment was introduced.

Camilla Esmund says: “Worryingly, not only are women struggling to build pension wealth, but they’re also more likely to have no pension savings at all. Women are more likely to take time out of the workplace long term, potentially relying on their partner’s pension to provide for them in retirement.” 

According to government research, in late 2023, 5.44 million women aged 16–64 were economically inactive (25.3% of women in this age group) compared to 3.84 million men aged 16–64 (18.4%).

Greater pension engagement - how women can take control of their financial futures

Note - the below is for educational purposes only, and should not be considered financial advice.

Camilla Esmund explains: “Greater engagement, and empowering women to take control of their financial futures, is going to play a key role in helping to close this persistent gap. The good news is there are a number of ways women can make small changes that can make a big difference over time. And it’s never too late to make a difference. 

“A great first step is to get a state pension forecast. If there are any gaps in your national insurance (NI) record – you need 35 qualifying years to receive the full amount – the sooner you can plug them, the better. This is particularly important if you’ve taken time out of the workforce to care for young children and/or elderly parents, for example.

“However – although the state pension can provide a valuable source of income in later life, it alone is unlikely to be enough to achieve a comfortable lifestyle – although this will vary person to person. If you’ve spent years out of the workplace, you might feel your current savings are a bit light. To make up for lost time, consider topping up your savings, which you can do by putting more each month into your workplace scheme or setting up a separate personal pension.

“The former should typically be your first port of call, as your employer may match some or all the extra you choose to contribute. And if they operate a salary sacrifice scheme, your payments will escape NI as well as income tax, putting some extra money in your pocket.

“If you’ve maxed out your workplace benefits, or are self-employed, a great way to put yourself in the driver’s seat is to open aSelf-Invested Personal Pension (SIPP). Unlike many other pensions, you have the flexibility to select how and where your money is invested. Bear in mind, you must be happy to make your own investment decisions. 

“Finally, a task that can put you further down the track without any extra funding is to round up any lost or misplaced pensions, which you can do by either using the government’s online tracing service or contacting your previous employer(s). To avoid pensions going astray in the future, consider merging several into a single plan, which you can do within a SIPP. This can make things easier to manage and reduce your fees – just make sure you don’t lose any valuable guarantees in the process.”