Recent data from the Trades Union Congress (TUC) shows that the gender pay gap has narrowed by 1.2% – the most significant annual improvement since reporting began in 2017. However, this positive progress also highlights another vital issue impacting women throughout their careers.
New figures from the UK Office for National Statistics (ONS) reveal a widening gender pension gap – a concerning figure directly linked to long-term pay inequality. This article explores the current data and underlying causes of pension disparity, along with several proactive measures to address the issue.
What is the gender pension gap?
The House of Commons Library defines the gender pension gap as the disparity in retirement income or wealth between men and women. While the gender pay gap reflects differences in average hourly earnings, the gender pension gap indicates the long-term effects of these inequalities throughout a woman’s lifetime.
As Scottish Widows pinpoints, “On average, the gender pension gap increases from £100 to £100,000 over a woman’s working life.” This issue starts in early careers, with women aged 25-34 having 45% less saved in their pensions than men of the same age, according to Interactive Investor.
Sources: Office for National Statistics, Interactive Investor
As reported by Trustnet, the gender pension gap for women aged 55 to 64 was 25% in 2016. By 2025, it has nearly doubled to 46%, leaving this group with an average of £89,000 less in pension savings.
What causes the gender pension gap?
To address this inequality, we must first understand its causes. The UK Parliament cites part-time work, career breaks for unpaid caring responsibilities and lower average earnings as key drivers. In 2024, Scottish Widows elaborated on these influencing factors:
- The gender pay gap
As discussed in our recent article, many women earn less than their male colleagues due to complex factors such as work patterns and underrepresentation in senior-level positions. Businesses report this data annually, enhancing our understanding of the UK gender pay gap and strategies to address it.
- Childcare responsibilities
The gap between women’s and men’s pensions widens significantly after having children. Scottish Widows notes that while men’s pension savings remain largely unaffected, women’s decline as they shoulder the majority of unpaid childcare responsibilities.
- Alternative working patterns
Scottish Widows’ 2023 ‘Women & Retirement Report’ found that 47% of mothers worked part-time to care for their children, compared to just 15% of fathers. This reduction in working hours results in lower earnings and missed employer pension contributions, making it more challenging for women to save equally for retirement.
3 proactive steps to close the gender pension gap
Interactive Investor reports that one in three women had no pension as of 2025, compared to one in four men, despite auto-enrolment increasing UK participation since 2021. Beyond enhancing accessibility for these groups, individuals can also use methods to maximise their pension benefits once enrolled. In 2024, Scottish Widows shared guidance to ‘Beat the Gender Pension Gap,’ outlining essential proactive steps:
- Increased awareness and saving at a younger age
Increased awareness is helping younger generations of women save for retirement earlier. In 2023, 62% of women aged 22 to 29 had begun saving before they turned 25. Scottish Widows advises that this is their best opportunity to close the gender pension gap, as money invested for a longer period will earn more compound interest.
- Discuss pensions as part of family planning
The financial impact on women raising children can be mitigated by splitting childcare costs, taking shared parental leave, or having a partner contribute to their pension. If a spouse isn’t working or paying income tax, THP Chartered Accountants advises that their partner can contribute up to £2,880 annually, which is boosted to around £3,600 with tax relief. For those who are employed, contributions must remain within their pension allowance, which is either £60,000 or 100% of their earnings, depending on which amount is lower.
- Discuss pensions during divorce agreements
Pensions should be a key consideration in the event of a divorce, as data indicates this process typically costs women £77,000 in missed savings upon retirement. With only 30% of divorcing couples including pensions in their settlements, The Standard reports that between £2-4 billion in pension savings are overlooked each year. Raising awareness on this issue could significantly impact closing the gender pension gap.
Additional advice for women to manage and optimise their retirement savings
- Missing National Insurance years and the carry forward rule
Rest Less explains that individuals can make voluntary contributions to fill gaps in their National Insurance record from the past six years, including time taken off work for maternity leave or family care. This can boost State Pensions by approximately £302 per year. However, it’s advisable to check the UK government’s guidance first to confirm eligibility and determine if this option meets your needs.
Furthermore, the pension ‘carry forward’ rule can accelerate efforts to close gender pension gaps. Pension Bee advises that this rule enables you to contribute beyond your annual pension allowance by utilising unused allowances from previous years, while still benefiting from tax relief from HMRC – typically £25 for every £100 you contribute.
- Optimising or combining pensions
Changing jobs throughout your career often involves opening pensions with different providers. The UK government’s Pension Tracing Service can assist you in locating them and monitoring the total amount saved in your accounts. After this, it’s important to decide whether to keep them separate or consolidate them. For example, The People’s Pension recommends researching your account fees and investment performance before transferring, as you may combine an account with high charges into another with a lower rate, thereby maximising your savings.
- Talk to your employer about increasing pension contributions
If you’re earning enough to increase your pension contributions, The People’s Pension advises discussing this with your employer, as they can make the adjustment and may potentially boost their contributions as well. As stated, “Small increases in money going into your pension pot can lead to big improvements later in life,” positioning this as another effective tool to close the gender pension gap.
Work with Distinct
Similar to addressing the gender pay gap, securing a higher salary can enhance pension savings. However, YouGov data from 2022 reveals that just 33% of women have ever sought a raise. To tackle this issue, our recruiters at Distinct have recently provided strategies to assist women in successfully negotiating increased salaries and obtaining promotions.
At Distinct, we are committed to educating ourselves about equality issues and actively work to dismantle barriers for working women. If you’re looking for a new job with improved pay, flexibility, culture, and career progression, contact us today.
