The disparity in average wages by gender is a much-discussed topic. The Trade Union Congress (TUC) predict that if progress remains at the current rate, the gap won’t be closed until 2056. Less discussed than this, but just as important, is the gender pensions gap: the difference between men and women’s retirement income.
Government data, taken from 2020-2022, shows that that the average private pension value for those aged 55-59 is £156,000 for men, and £81,000 for women. That means women are retiring with almost half as much in their pensions as men. In this article, we’ll discuss what contributes to this gap and what individuals can do to help their own situation. We’ll also discuss what the government are doing to address it.
Contributing factors to the gender pension gap
Even with the best intentions, women may struggle to build their pension pots in the same way that men do. There are several factors that may contribute to this. These may include taking career breaks, average wages and salaries and having a longer average life expectancy.
Career breaks
In many cases, it is the woman that will take parental leave when they have a baby. Whether they return to work after 9-12 months of maternity leave or choose to take a longer career break, it can impact their retirement income. Whilst receiving maternity pay, the employee will continue to receive workplace pension contributions from the employer based on their normal salary. Employee contributions, on the other hand, are based on the received income.
Maternity pay may not leave individuals with a lot of disposable income. Pausing private pension contributions can be seen as a way of saving money in the short-term, despite the long-term impact on retirement income. When returning to work after maternity leave, some choose to return on a part-time basis. The workplace pension contributions from both employee and employer will then be impacted.
Some women leave employment entirely when starting their family, whether through choice or otherwise. This career break may last for a couple of years. Unlike with maternity leave, those taking a career break will not be entitled to workplace pension contributions in their absence. Research from AJ Bell has shown that those taking a career break before returning to work part-time could lead to a pension shortfall of £100,000 at retirement, compared to if they continued to work full-time with no career breaks. This will lead to a significant difference in retirement income.
Average wages
As we mentioned before, women are still paid, on average, less than men. The Office for National Statistics (ONS) statistics from April 2024 show the average hourly rate for a full-time employee as £19.24 for men and £17.88 for women. As workplace pension contributions are often calculated as a percentage of earnings, it therefore follows that women’s workplace pension contributions will be lower than that of a man.
Women are also more likely than men to work part-time. They may therefore not reach the auto-enrolment threshold for workplace pension contributions, instead requiring to actively opt in. The onward impact of this will be lower value pension pots at retirement.
Average life expectancy
The ONS have determined that the average life expectancy at birth from 2022-2024 is 83 for women and 79.1 for men. This means that the pension pot that has been accrued needs to last for longer. Even assuming a man and a woman retire with the same size pension pot, at the same age, the woman’s will, on average, need to last longer. This means their yearly retirement income will be less.
How can women help their own situation
Despite the aforementioned factors, all is not lost for women. There are a few simple actions that can be taken to lessen their impact. Those contributing less to their pensions due to maternity leave or career breaks may be able to increase their pension contributions when they return to work. By maximising the benefits offered by their employer, they may lessen the shortfall. Some employers offer contribution matching, so by an employee contributing the maximum their scheme allows, they will maximise the employers’ contribution too.
A small, but wide-impacting action you can make is around pay rises and bonuses. On receiving either, if you raise your pension contributions before you get used to the extra money, you’ll benefit from a greater pension pot, without feeling the impact in the short-term.
It can also be useful to look at forms of retirement income outside of your pension. Maximising tax-efficient investment opportunities, such as Stock and Shares ISAs whilst working, may provide additional income streams upon retirement. Individuals are currently able to invest £20,000 per financial year into ISAs. Any growth* from these investments is free from both income and Capital Gains tax. Changes to the ISA allowance were announced in the 2025 Autumn Budget, which will come into effect from April 2027. Read more about these changes in our Budget Overview blog post.
What the government are doing to address the gender pension gap
The government are in the process of looking at pension reform, in part to address the gender pension gap. Towards the end of July 2025, the government announced the revival of the Pension Commission. You can learn more about the Commission’s objective in our blog post from the following month. At the time, Minister for Pensions, Torsten Bell, outlined the objective of the Commission as the need to build “a strong, fair and sustainable pension system fit for the middle of the 21st Century”. Their report will be presented in 2027, and will look in part to address the persistent 48% gap in pension pots between men and women.
How Willday Wealth Management can help you
Our team of experts are here to help you retire your way with tax-efficient, diversified investments. Our team will also give advice, targeted to your circumstances, to help you minimise the impact of any career breaks on your retirement income. Wise financial planning today, can diminish retirement income frustrations later. Contact us by calling 0116 222 0119, or by emailing hi@willdaywm.co.uk, to discuss your private pension or Stocks and Shares ISA.
* With investing, your capital is at risk and you may get less than what you invested.
