Why’s there a gender pay gap in pensions?

Aegon blog Gap

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11 September 2021

Women often have disrupted work patterns, career gaps and work part-time – this can impact their ability to save consistently for retirement without savings gaps. The average pension pot for a 65-year-old woman in the UK is £35,800 – that’s around one fifth of the average 65-year-old man’s pension pot.1

Our analysis found that a woman with two children in her early thirties, who takes a full two years of maternity leave and returns to work part-time, could miss out on up to £50,000 in retirement savings.2

Lower pay and less job security fuel the gender pension gap, which among full-time employees is 7.4%, growing to 15.5% when employees of all hours are included.3 Pension contributions are normally based on a percentage of pay. So earning less, and time out of the job market, means lower pension contributions.

How auto-enrolment fuels the gender pay gap

Most people are auto-enrolled into a pension scheme when they start a new job in the UK, provided they:

  • Are aged between 22 and State Pension Age.
  • Earn more than £10,000 a year in a single job.
  • Normally work in the UK under a contract of employment.

Some women miss out on auto-enrolment because they’re self-employed, and the rules of auto-enrolment don’t cover the self-employed.

10 ways women could increase their pension savings

There are a few ways that can help you (or those you know) keep retirement savings on track – and avoid some of the pitfalls that can eat away at your final pension pot.

The information in this article is based on our understanding of current legislation, current taxation law and HMRC practice, which may change. The value of any tax relief will depend on your individual circumstances.

1. Starting early
Employers must auto-enrol eligible employees from the age of 22, but you can ask to be enrolled from age 16 subject to meeting the qualifying earnings trigger.

2. Making a contributions plan
Setting a goal for how much you might need in retirement can help you achieve it. Online tools and calculators can help, like ones on the Money Advice Service website. Once you’ve worked out your retirement income target, consider how you’ll get there by thinking about these three things.

  • How much can you afford?
  • How much does your employer pay?
  • If you pay in more to your pension, does your employer pay in more?

3. Paying before you go on a career break or maternity leave
Before any career break it could be a good idea to overpay into your workplace pension, and to stay in it during maternity leave. If your employer pays into your workplace pension they must continue to do so while you receive Statutory Maternity Pay, which is for up to 39 weeks, and employer contributions could be paid for longer if that’s in your contract.4

4. Reviewing all your investments
Take a look at where your pension pot is invested. Ask yourself, ‘are these the right investments for me?’ and ‘are they generally performing well?’. If you’re not sure of the answer, speaking to a financial adviser can help. Bear in mind that the value of an investment can fall as well as rise and isn’t guaranteed. The final value of your pension pot when you come to take benefits may be less than has been paid in.

5. Making contributions – even if you’re not a taxpayer
If you’ve no earnings, or earn less than £3,600 a year, you can still pay into a pension scheme and qualify to have tax relief added to your contributions – up to a certain amount. You can put £2,880 a year into a pension, and for each £8 saved HMRC will add £2 in tax relief (£720). Find out more on the Money Advice Service’s website.

6. Avoiding the £10,000 rule
Those earning below £10,000 are not automatically enrolled, but can request to join the workplace pension scheme, gaining the added bonus of employer contributions.

7. Making use of the marriage allowance
Where one partner earns below £12,570 and the other up to £50,270, it pays to claim the marriage allowance. The lower earner gives up 10% of their tax allowance to the other, increasing take-home pay by £251 a year, and, backdated up to four years, £1,219 may be due. This saving could be put into the lower earner’s pension (often the woman). If you’re in Scotland, your partner must pay the starter, basic or intermediate rate, which usually means their income is between £12,570 and £43,662.

All figures are for tax year 2021/22. Find out more about the marriage allowance and how to apply.

8. Avoid missing out on child benefits
People often assume they’ll automatically get the full amount of State Pension when they retire. However, you’ll only get the full amount if you’ve paid, or been credited with, National Insurance contributions for 35 years. The word ‘credited’ is vital because even if you’re not working while looking after a baby, you’ll receive National Insurance credits when you claim Child Benefit until your youngest child is 12. The credits are added automatically to your National Insurance record when you claim Child Benefit.

Find out more and check if you qualify for Child Benefit.

9. Checking your State pension entitlement
The State Pension acts as a foundation for retirement income for many people – so it’s a good idea to work out when you’re entitled to it, what you’re going to get and whether it’s actually enough for you to live on. You can find out how much State Pension you’ll get by going to the gov.uk website for a forecast. This should show you if you need to fill in any National Insurance gaps to boost this amount.

Check out our article that covers this topic in more detail, What State Pension you’ll get and when?.

10. Getting financial advice or guidance
Now you’ve read the other nine tips – you’ll probably start to see why we’d recommend speaking to a financial adviser if you don’t already have one. In an uncertain world the need for financial advice has never been greater. Many of us don’t have the experience, interest, or time to look after our own retirement planning.

If this sounds familiar – then one of the best ways to plan for the future and help reach your financial goals is to work with a financial adviser who specialises in pensions and wider retirement planning. They can bring peace of mind over your pension planning. By working together, you can create a retirement road map to get to where you want to be, as well as helping to keep your plans on track along the way.

To find out more, read How can a financial adviser help me?. You can also search for a financial adviser by visiting the Money Advice Service.


1 Insuring Women’s Futures – Chartered Insurance Institute – Page 133 - January 2020

2 Mums could miss out on £20k in pension savings when they have children and work part-time – Aegon Research – 5 October 2020

3 Gender pay gap in the UK: 2020, Differences in pay between women and men by age, region, full-time and part-time, and occupation – Office for National Statistics - 3 November 2020

4 Protecting your workplace pension after having a baby – The Money Advice Service

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