Gender pension gap: women trail men by £100,000 in retirement savings

New research by Scottish Widows shows that women have around £100,000 less in pension savings than men when they reach retirement age.

The pension provider's 'Women in Retirement' report found the median retirement income for men is around £5,000 a year higher than for women.

Here, Which? explains why the gender pension gap exists and shares five ways you can keep your retirement savings on track.

The gender pension gap

The gender pension gap is the difference in retirement savings and income between men and women. 

This gap exists for several reasons. Women typically earn less than men due to the gender pay gap, work fewer hours over their careers because of caregiving responsibilities, and save less into pensions and other investments. 

Divorce settlements can also leave women shortchanged, as pensions are often overlooked. 

Meanwhile, gaps in National Insurance records mean some women can miss out on state pension entitlement. 

• Find out more: auto-enrolment explained

The difference in average retirement income

Scottish Widows found that after tax and housing costs, the average woman is on track for an income of £12,000 a year in today’s money during retirement, compared to £17,000 for men. 

This figure includes income from private pensions, other long-term savings, inheritance, and the state pension or pension credits.

The report found that women have significantly smaller retirement savings pots than men: 56% of women are set to receive income from a defined contribution pension, with the average pot worth £151,000. This compares to 68% of men, whose pots are valued at £281,000.

A similar gap exists in other long-term savings: 49% of women are on track for a retirement income from long-term savings, compared to 61% of men. Women relying on savings expect to retire with an average of £83,000, that's £39,000 less than men.

• Find out more: what happens to your pension when you die

How much you need to retire

The Pensions and Lifetime Savings Association sets out three retirement living standards to help people plan for the future:

• A minimum lifestyle requires £14,400 per year for singles (£22,400 for couples), covering basic needs such as food, utilities, and a one-week UK holiday.
• A moderate lifestyle costs £31,300 for singles (£43,100 for couples), allowing for some extras such as occasional holidays, takeaways, and a car replacement every seven years.
• A comfortable lifestyle costs £43,100 for singles (£59,000 for couples), affording luxuries such as frequent holidays, premium groceries, and a car replacement every five years.

Scottish Widows found that 42% of women and 35% of men are in danger of poverty in retirement, with an income below the minimum standard.  

• Find out more: how much you need to retire 

What can be done to close the gap?

Scottish Widows has warned that without further action, such as changes to legislation, it could take another 20 years to close the gender pension gap.

Changes to auto-enrolment, which have already been legislated for, are expected to bring 2.5 million more workers into pension saving. This includes lowering the minimum age to 18 and removing the lower earnings limit for minimum contributions, meaning the first pound of earnings will qualify for a matched employer contribution and tax relief.

The report also calls for joint annuities to become the default option. Unlike single-life annuities, which stop payments when the holder dies, joint annuities continue to provide income to surviving partners, offering women, who typically live longer than men, greater financial security.

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5 steps to keep your pension on track

There are steps you can take to boost your retirement savings, whether you’re just starting out or are catching up later in life.

1. Start saving early

Starting your pension early can make a big difference to your retirement savings, as money saved in your 20s has longer to grow. 

For example, £1,000 invested at age 20 could grow to roughly £2,500 in today’s money by the time you’re 65, compared to just £1,700 if you waited until age 40 to invest it.

If you’re over 22 and earning at least £10,000 a year, your employer must enrol you in a workplace pension and contribute alongside your payments.

You should aim to save 12–15% of your salary, including employer contributions and tax relief, to stay on track for a comfortable retirement. Some employers will match contributions above the minimum level, so increasing how much you pay in could mean extra money being added to your pot.

If you're self-employed, consider setting up a personal pension or a self-invested personal pension (SIPP).

• Find out more: best SIPP providers

2. Claim National Insurance credits

The state pension forms a significant part of most people’s retirement income, but career breaks can impact how much you’ll receive. 

What you'll get depends on your National Insurance record, so it’s important to check you’re on track. You can visit the government website to see your current entitlement and identify any gaps.

If you take time out of work to raise children, you’ll stop paying National Insurance Contributions (NICs) on your income. However, claiming child benefit for a child under 12 ensures you automatically receive National Insurance credits.

• Find out more: how you qualify for the state pension

3. Stay on top of career breaks

Reducing your hours or taking time off to care for children can significantly impact your pension. Scottish Widows says this can widen the gender pension gap to as much as 50%.

If you're part of a couple and one of you earns more than the other, or one is taking time out to have a baby while the other carries on working, you could decide to even up both pension pots by having the higher earner pay into the lower earner's pension. 

Policies such as shared parental leave can also reduce the financial burden on one parent.

Check if your employer offers enhanced contributions during leave and consider increasing payments when you return to work to help close any gaps. Alternatively, you could make a one-off payment to catch up. 

• Find out more: maternity and paternity leave explained

4. Track down lost pensions  

There are 2.8m lost pensions in the UK, each worth an average of £9,000. 

If you’ve changed jobs or moved house, it’s easy to lose track of old pots, but reclaiming them could make a big difference to your retirement savings.

Thankfully, there are plenty of tools available which can make hunting them down a lot easier. We've rounded them up in our guide on finding old pensions. 

5. Don't forget about pensions if you get divorced

Pensions are often the second-largest asset in a marriage after property, but they’re frequently overlooked in divorce settlements. 

In fact, only one in six couples include pensions in their financial discussions during divorce.

If you’re going through a divorce, make sure pensions are part of your financial negotiations. You can ask for a pension valuation and consider a pension sharing order to divide pots fairly. 

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