The Impact of the Gender Pension Gap

Receiving a fair pension is of the upmost importance to any individual who has reached or is approaching the end of their working life.

Unfortunately, there is evidence to suggest that gender continues to play a notable role in the income an individual is eligible to receive from their pension. To further this complexity, it should be noted that private and state pensions may behave differently when it comes to their gender gaps. In this blog from Hansford Bell, we discuss why the gender pension gap exists, going on to offer some recommendations for women regarding steps that can be taken to mitigate the impact of this on their financial situation. We will also outline the key differences between state and private pensions.

For more informative articles relating to matters of finance and financial planning into retirement, take a look at our blog. Articles include Income Drawdown vs Annuities for Retirement, Are Retirement Interest Only (RIO) Mortgages a Good Idea? And Financial Tips and Considerations for Retiring Abroad.

What is the Gender Pension Gap?

The gender pension gap refers to the percentage difference received by female pensioners when compared to male pensioners. The gender impact of the gender pension gap is especially detrimental to women as there are limited solutions available to reduce its effects. At present, the government receive frequent criticism regarding their handling of issues associated with the gender pension gap, with many alleging that insufficient attention is paid to the issue. Not only is there no existing estimate of the gender pension gap, but the issue is also untouched by government policies – meaning there are no current regulations governing the gap.

Why is there a State Pension Gap?

 In simple terms, the state pension is a regular payment that an individual can receive from the UK government once they have reached state pension age. The amount an individual is entitled to (and whether they are eligible at all) is contingent on them having paid a given amount of national insurance over their working life. In recent years, the gap in the state pension awarded to men and women has reduced. For those born in the early 1950s, the difference between men’s and women’s average state pension has closed to near zero. For those born a decade earlier, state pension stood at approximately 25% less for women than for men.

Why is there a Private Pension Gap?

 A private pension refers to a pension scheme that is opted and paid into by the individual themselves. Across private pensions, overall trends indicate a reduced take-home for female workers, this disparity could be caused by the following factors.

  • Disproportionate rates of occupational pension saving between men and women. This difference can be caused by a handful of factors. These include the impact of women taking breaks from employment or reducing hours due to familial responsibilities and the overall average lesser working of women than men over their lifetime.
  • Indirect issues of gender discrimination within the pension system as a whole. Instances of this include how in many circumstances women have not been automatically enrolled into a pension scheme.
  • The average level of pension awarded to men and women is also unequal. This is a key challenge that is not set to be addressed until 2024. The effect of this review will however only be felt by those reaching state pension age from that year onwards.

How to Mitigate the Impact of the Gender Pension Gap?

Start Early and Pay as Much as Possible

 Time is of the upmost importance when looking to accumulate a pension. The more you save earlier on, the more time your contributions have to grow. Compounding can also allow individuals to gain returns on their past returns. The longer your timescale ahead of retirement, the faster your money could grow.


Keep Up with Pension Contributions

 Missing or providing reduced contributions during an individual’s 20s and 30s can have a considerable impact on retirement income – so, it’s best to get ahead of this early. Getting ahead allows greater flexibility when it comes to time away from the workforce, whether that be to have children, travel or unexpected periods of illness or personal circumstances. Keeping up with payments will also bode well for instances where an individual may wish to reduce their hours.


Maximise Employer Contributions

Many businesses offer an incentivised contribution format for their employees. Many businesses offer to pay more to match an employee’s contributions should they choose to increase their payments. When starting at a new business, it is always worthwhile to enquire about pension procedures – to ensure you’re getting the most out of your employer.


Increase Contributions upon Pay Reviews

Another way in which women can mitigate the impacts of the gender pension gap is by altering their pension contributions in alignment with pay reviews. It can be easy to forget about the wider implications of a salary increase – checking in with how much you are paying into your pension allows for the appropriate increase to be selected for future months.


Track Down Lost Pensions

Pensions can become lost for a variety of reasons, for example; a change in workplace or home address. Failing to keep track of the whereabouts of your individual pensions can result in a significant loss to overall pension value. If you are unsure about whether or not you have any missed pensions, write down all of the businesses for whom you have worked and check to see whether you have the paperwork relevant to each pension. Should you find any missed pensions, you may wish to utilise a pension tracing service, such as that provided by the government.

What can an Employer do to Mitigate the Gender Pension Gap?

In addition to how employees can mitigate the impact of the gender pension gap, it is also important to consider the ways in which employers can help tackle this challenge.

One recommendation for businesses is to re-enrol staff onto their pension on an annual basis. Typically, many businesses re-enrol their workers every three years.  Not only would doing so allow employees who have taken career or payment breaks to re-engage with the scheme, it also allows a business to assess whether the selected pension is appealing to the workforce, highlighting any need for change.

Other suggestions include employers continuing to make pension contributions during parental leave – or reminding their staff that other friends or family members are able to make pension contributions should the support be required.

There is also evidence to suggest that increased flexible working has an overall impact in reducing pension gaps and breaks in pension payments. Making it clear to all staff members, including senior men that workplace flexibility is available to all staff members – reducing structural inequality within the workplace.

Financial Advice and Pension Planning with Hansford Bell

Hansford Bell are financial specialists with a personal approach. We take the time to get to know our clients and help them understand what their financial needs and goals are – supplying the necessary support to help them achieve these goals. Although we do not offer power of attorney, we have experience with a large variety of clients with a range of different needs and are on hand to offer impartial, independent advice. Our strategy combines simplified, straightforward tips and guidance with cutting-edge technology and a comprehensive understanding of your situation. Our services help you focus on your finances, so you can focus on living your life. Keen to speak to a member of our team? Get in touch today.

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Hansford Bell aren’t your average team of financial specialists. We take the time to get to know our clients and help them realise what they want from their life, whether that’s a personal ambition or a financial goal.

Our planners are highly experienced and know the industry inside-out. We combine simplified, straight-forward tips and guidance with cutting-edge technology and a comprehensive understanding of your situation. We focus on your finances, so you can focus on living your life.

Want to know more? Talk to us today and we can start making that dream future a reality!