The Wire: Winter 2021Tackling pension inequality – what needs to be done to close the gender pensions gap

(Estimated read time 5 minutes)

Tackling pension inequality – what needs to be done to close the gender pensions gap

For years, we have known that there is a gender pay gap. While much work has been done to tackle the issue, the Office for National Statistics report that, in 2020, the gender pay gap among all employees was still 15.5%.

One issue that is not as commonly discussed is the gender pensions gap. In many ways this is worse than the pay gap, with stark differences between the average man and woman’s pension.

Back in July, Legal & General published research showing that women have lower pension pot sizes in every age bracket, with the situation “significantly deteriorating” as they approach retirement.

The research found that the typical gender pension gap is 17% at the beginning of women’s careers and increases to 56% at retirement compared with men. L&G also found that the pension pot for a woman at retirement was less than half that of a man. 

A major piece of research by the University of Manchester backs up the fact that men have substantially more private pension wealth than women.

For example, in the 65 to 69 age group, median pension wealth for men is just over £212,000 compared to just £35,000 for women.

Source: The University of Manchester

As you can see from the above chart, median pension wealth is much lower for women than men in each age group, most notably in early retirement.

The situation can be even worse for divorced women

While the gender pensions gap is stark, the situation is often even worse for divorced women.

The University of Manchester research also found that divorced women’s pensions are much lower than their male equivalents. Divorced women not cohabiting in their late 60s have less than 30% of the pension of equivalent men.

There are two key reasons for this:

  • Divorced women often have dependent children, which means that even if they are employed, they are less likely to be contributing to a pension.
  • Women will often prefer to take a share of any assets in the form of property – typically the family home – than in pension assets.

Debora Price, co-author of the report and professor of social gerontology at the University of Manchester, told the Guardian: “Divorce is a very emotional time for couples. It is especially difficult for them to think about pensions and often, the person with the larger pension – almost always the husband – does not want their pension to be shared as an asset in divorce.  Women are often very focused on keeping their homes for themselves and the children and are often prepared to give up quite a lot to secure that.” 

Fundamental and sustainable change is needed

By 2050, more than a third of the UK population (36%) will be over State Pension age. By 2100, old age dependency is expected to approach one in two.

It is easy to see the economic implications of women’s pension deficit. If women lack pensions resilience, then everyone lacks financial security, and part of the solution involves improving equality for men, too. 

The Chartered Insurance Institute (CII) concludes that: “A fair and financially resilient later life for all requires holistic and sustainable change: by policymakers, regulators, master trusts, employers, society, the financial services profession, women and men themselves, to support gender inclusivity across the pensions spectrum.”

While change may need to be more systemic, here are five ways you can boost your pension in retirement.

5 ways you can tackle the gender pensions gap

1. Maximise your State Pension

To receive the full new State Pension of £179.60 a week you must have 35 years’ worth of qualifying National Insurance contributions (NICs). You will normally need 10 qualifying years to get any State Pension.

You may get a “qualifying year” if you were unemployed, a carer, or parent (for example, National Insurance credits are paid to people claiming Child Benefit for a child under the age of 12). 

However, if you do not think you will reach 35 qualifying years, you can make voluntary contributions to “buy” additional years.

2.Make the most of employer pensions

There are three benefits to maximising your pension contributions at work:

  • You will benefit from employer contributions. If you stop paying in, your employer might stop paying in too, and you will lose this valuable additional contribution.
  • You get tax relief on your contributions. As a basic-rate taxpayer, every £100 pension contribution costs you just £80. Higher- and additional-rate tax relief is also available.
  • You will benefit from compound returns on your investment. If you start contributing early, the “growth on growth” could be significant over several decades.

If you can afford to keep up your contributions while you are on maternity leave, this is also beneficial. You will pay less because you only pay in a percentage of your maternity pay while your employer must continue at their normal level.

3. Pay into a pension – even if you are not working

A little-known fact is that you can benefit from basic-rate tax relief on pension contributions even if you are not working.

You can save up to £2,880 into a pension each tax year, and tax relief adds another £720 to your fund (correct in the 2021/22 tax year).

4. Delay taking the State Pension

If you do not immediately need your State Pension when you reach State Pension Age, you can defer your payments. 

For every nine weeks you defer taking your State Pension, it increases by 1%. So, if you are entitled to the full new State Pension of £179.60 a week, deferring it for 52 weeks you will get an extra £10.42 a week. 

Remember though, despite the increased future income, you are giving up income in the immediate sense.  You would ultimately need to claim the basic State Pension for a minimum of 17 years to “earn back” the pension income you deferred initially. 

5. Ensure pensions are considered on divorce

Research from Legal & General has revealed that many people don’t fully consider assets such as pensions when they go through a divorce. 

The insurer found that only 12% consider pensions when dividing assets with their partners, and a quarter (24%) actively waive their rights to the value of them.

As you read above, there is a significant disparity between the pension wealth of divorced men and women, often because pension assets are not considered. Despite changes to the law designed to encourage a fairer split on divorce, figures suggest as few as 12% involve any sort of pension sharing.

Even more worryingly, just 3% of people seek financial advice when they divorce. 

Not speaking to a professional financial planner can have significant financial implications. If you do separate from your spouse, it’s vital that you consider the value of pensions when dividing assets. This could ensure you benefit from a fair share of pension wealth, which could enable you to live the life you want when you retire.


If you are unsure about any of the aspects discussed above, please speak to us.  We can:

  • Review your State Pension position, work out what your eligibility is, and see whether making voluntary contributions and/or deferring your entitlement to boost your State Pension is worthwhile.
  • Work out what you would need to contribute to your personal and/or employer-based pension to achieve the fund that will enable you to live the life you want to in retirement.
  • Help you understand what pension provision you can make even if you are not working.
  • Provide financial guidance and clarity should you find yourself traversing the uncertain grounds of divorce.
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