Women are falling further behind as pension gap widens

Women are saving roughly half the amount men are putting aside for their retirement, with the pensions gender gap widening over the last five years.

Women’s private pension pots reach £81,000 on average in their late 50s, while men of the same age hold around £156,000 – representing a gender gap of 48% – according to new research by the Department for Work and Pensions. That figure is the highest since collection of data began in 2006, having reached a record low of 35% in 2020.

Women have long lagged behind men when it comes to saving for retirement, partly as a reflection of the higher rates of part-time or casual work among women. But the gap had been narrowing before the pandemic.

The data also reveals that just one in four people of working age from Pakistani or Bangladeshi ethnic groups are saving into a pension, compared with more than one in two white workers.

The government is launching a new pensions commission which will look at how to encourage groups that are undersaving, amid concerns that Britain is heading towards a crisis that will be exacerbated by an ageing population.

The commission will consider how the pension system can better reflect the UK’s changing workforce and help more people build financial security in later life.

Despite more than 22 million employees already saving through a workplace pension, more than 18 million working-age people are not saving into a pension at all. While someone who builds a pension pot of around £165,000 will enjoy an annual income of about £24,000 during their retirement, those who are reliant on the state pension alone receive, on average, less than £10,000 a year.

Pensions inequalities will be a key area of focus for the expert panel seeking to understand why people opt out of workplace schemes.

Work and pensions secretary Liz Kendall is overseeing a major shake-up of how people save for retirement as part of the pensions scheme bill. Changes could include the creation of an emergency savings pot that people can access before they retire, as a way to encourage those who are reluctant to part with their cash. The government hopes to generate an average £29,000 boost to savings through changes introduced in the bill.

The government is also expected to confirm that it will again be reviewing the state pension age, which it is legally obliged to do within a certain time frame. But no change will be made during the current parliament.

The commission, which was launched alongside the bill, has been tasked with building on a similar 2006 initiative that paved the way for auto-enrolment. In 2022, 10 years after auto-enrolment began, the government said that 10.7 million people had used the scheme. The panel will report back in 2027.

Kendall said: “Everyone deserves a secure retirement after a lifetime of hard work. But without action, women and many people from ethnic minority backgrounds will be left behind and face an uncertain future.

“Our pensions commission is about fixing that: making sure everyone, whatever their background, gets the chance to build a solid foundation for retirement and have the future they deserve.”

Photograph by Dan Kitwood/Getty Images