You may have heard of the gender pay gap, but have you heard of the gender pension gap?

The gender pension gap refers to the difference in pension income and overall retirement wealth between men and women. The latest data used by the government to measure the gap shows that in the UK:

• By the Normal Minimum Pension Age (currently 55), women are estimated to have 35% less private pension wealth than men, on average.

• For those who are State Pension age or older, average gross pension income (including State and private pensions) is estimated to be 37.9% lower for women, on average.

A gap clearly exists and it doesn’t suddenly appear at retirement – it typically begins much earlier in life. Recent research from AJ Bell (an investment platform) has found that the gap starts as early as age 28. They point to several reasons for this:

• Changes to Priorities & Working Hours

For many women, key life events such as starting a family, caring for others, and/or pursuing self-employment, can lead to competing priorities. Data suggests that this friction typically starts to occur in their late 20s, and while decisions can be made for good reason, they can have a lasting impact on long-term financial security.

For example, recent figures from the Office of National Statistics indicate that the average woman in the UK has her first child at age 29. In addition, when comparing part-time work for men and women between age 29 and 40, 21% of the women surveyed said that they work part time, compared to 5% of the men.

Reducing working hours or stepping back altogether, even temporarily, can mean that many women miss out on key years of pension growth. They may actively choose to reduce or stop pension contributions, typically because they aren’t affordable and other things take priority. Alternatively, lower contributions may be the result of reduced earnings. Some individuals may also fall below the earnings threshold for automatic enrolment. Over time, even relatively short interruptions to pension saving can have a significant impact as there is less opportunity for contributions and investment growth to compound. Often, this impact isn’t seriously considered until later in life, when there is less time to address it.

Looking at current data, this priority gap looks to shift when women reach age 41. At this point, women are seen to prioritise their pension equally to men, with 29% of women age 41 to 55 naming their pension as a financial priority, compared to 30% of men. While missing out on early growth is significant, it is never too late to make a difference. At age 41, adding just £100 pm to a pension and allowing contributions and growth to compound over say 10-20 years could equate to a much larger pot. This is, of course, subject to factors like investment growth and charges.

• The Gender Pay Gap

Differences in earnings also continue to play an important role. Government data tells us that even when women are working full time, on average, they still earn 6.9% less than men. Not only is this a significant difference in take-home pay, but it can see women making consistently lower pension contributions throughout their working life. It can also see lower contributions made by employers, exacerbating the impact. Again, even small differences in monthly contributions can compound into a significant gap over long time periods.

This highlights the importance of viewing pension planning as a key part of your wider financial planning strategy. Crucially, it is something that should be considered earlier in your working life, rather than close to retirement. Small, consistent actions taken early, even at the beginning of a career or during a break, can help improve long-term outcomes.

So, What Can Be Done?

For many people, the most effective step is simply starting the conversation early. Financial planning is not about perfection or predicting every life event – it is about adapting plans as circumstances change and making informed decisions at each stage of life.

Examples of planning strategies include:

• Reviewing pension contributions, particularly after periods of leave or career breaks.
• Taking advantage of automatic enrolment, and matched employer contributions where available.
• Reviewing pension holdings to make sure they remain suitable for your circumstances.
• Ensuring pensions from previous employments aren’t overlooked.
• Regularly reviewing State Pension entitlements and National Insurance records.
• If possible, maintaining pension contributions and other savings during periods of reduced working hours, even if this is at a lower rate.
• Considering a household as one unit. This may mean looking to achieve more of a balance in savings/pension provision between a couple if one person has stepped back from work to support the family.

Importantly, the conversation around the gender pension gap is evolving. Pension providers, employers, and policymakers are increasingly recognising that planning needs to reflect different life journeys, rather than a ‘one-size-fits-all’ model. Calls continue to be made for changes to automatic enrolment rules and for wider efforts to reduce the gender pay gap, both of which could help to improve retirement outcomes over time.

The above are all points that we consider for our clients, adapting strategies to suit ever-evolving circumstances. If you would like to discuss anything that has been raised in this article, please contact one of the team.