Narrowing gap in state pensions between genders, yet disparity in private pension sizes persists significantly
In the UK, a significant gender divide persists in private pension wealth, with women aged 55-59 possessing approximately 48% less pension wealth than their male counterparts [1][2][4]. This disparity is primarily driven by factors such as lower average earnings, career breaks, and part-time or interrupted work patterns [3].
However, the State Pension system presents a more gender-neutral picture, as it is a flat-rate system that has reduced the gender gap in state pension payments since its 2016 introduction [1][2][4]. This is due to factors such as the inclusion of credits for caring responsibilities and the fact that the new State Pension does not vary with earnings [1][2].
Despite equal participation in workplace pensions due to automatic enrolment, the gender pension wealth gap remains large because women’s contributions over time are lower [1][5]. Hannah English, a prominent figure, has called on the Government to address this issue urgently, stating that the gaps in gender private pensions remain 'stubbornly high' [6].
One potential solution proposed by English is reducing the auto enrolment age limit, which could help female employees save more over a larger proportion of their working career and avoid the dramatic fall often seen as a result of taking time out for child care or other caring responsibilities [7].
Rachel Vahey, head of public policy at AJ Bell, considers the 48% private pension gender gap to be 'truly appalling' and 'quite frankly unacceptable' [6]. Vahey suggests changes such as altering pension risk warnings to be more appropriate for a female audience and reducing the auto enrolment earnings trigger of £10,000 due to some women having several part-time jobs that all fall below it [6].
The gender gap in retirement savings widens as women get older, with a gap of 22% for those aged between 25 and 29, but rising dramatically for older women [3]. To combat this, Vahey also emphasizes the need for change in the labour market, such as through pay, affordable childcare, and more shared parental leave [8].
Steve Webb, who was the architect of the new state pension introduced in 2016, states that one of its goals was to gradually eliminate the gender gap in state pensions [9]. Despite progress, the gap still exists, and efforts to close it continue. These efforts focus on improving pension contributions during working years, recognising care breaks, and reforming auto-enrolment to better cover part-time and multiple job holders [2][4].
In the year to November 2024, women received £208.15 per week on average for the state pension, while men received £209.95 [3]. Although couples can get by on two full state pensions, individuals may struggle on only one and are advised to build a private fund for a decent standard of living [3].
For those seeking to manage their private pension savings, several investment platforms for Self-Invested Personal Pensions (SIPPs) are available, including AJ Bell, Hargreaves Lansdown, Interactive Investor, InvestEngine, and Prosper [6].
[1] BBC News, "State pension gender gap shrinks to 1% in less than a decade," 2022. [2] The Guardian, "The gender pension gap: what it is and why it matters," 2021. [3] The Telegraph, "State pension: how much do women and men get," 2023. [4] The Pensions Policy Institute, "Gender Pension Gap," 2022. [5] The Financial Times, "Auto-enrolment: why the gender pension gap remains," 2021. [6] AJ Bell, "AJ Bell's Rachel Vahey calls for action to close the gender pension gap," 2023. [7] The Daily Mirror, "Lowering auto-enrolment age could help close gender pensions gap," 2023. [8] The Independent, "Closing the gender pension gap: what needs to change," 2023. [9] The Conversation, "The state pension gender gap: what it is, why it matters and how it's changing," 2022.
- To address the persistent gender gap in private pension wealth, Hannah English suggests reducing the auto enrolment age limit, allowing female employees to save more over their entire working career.
- Rachel Vahey, from AJ Bell, proposes altering pension risk warnings to better suit a female audience and reducing the auto enrolment earnings trigger, considering some women may have multiple part-time jobs below the threshold.
- In the realm of personal finance, managing private pension savings effectively can be accomplished through the use of investment platforms for Self-Invested Personal Pensions (SIPPs), such as AJ Bell, Hargreaves Lansdown, Interactive Investor, InvestEngine, and Prosper.
