While huge strides have been made to ensure gender equality in many walks of life, one area where there remains a large disparity between men and women is in the realm of pensions.

Research by the Chartered Insurance Institute (CII) has revealed a significant gender pension gap, with the average 65-year-old woman having pension savings of just £35,800 – a fifth of her male counterpart.

So, how big is the gender pension gap? Why does it exist? And what can be done to tackle the problem? Keep reading for answers to these questions and more.

Some facts and figures

Some of the figures relating to the gender pension gap are quite startling:

• A woman taking a five-year career gap will have 33% less pension at age 65 than her male counterpart
• The average 65-year-old woman will have pension savings a fifth the size of a 65-year-old man
• A recent report by the trade union Prospect found that the gender pensions income gap (39.5%) was more than double the size of the total gender pay gap (18.5%), with the average female pensioner £7,000 a year poorer than their male equivalent.

Research in FT Adviser has also revealed that education is the only industry where women receive higher pension contributions than men, according to an analysis of government figures.

And, new research published in Money Marketing shows that this is an issue which is not going away. 34% of women questioned in the study said that they did not have any pension plan, twice the number of men (17%).

Of these, two in five said that they had no intention of starting one, meaning that potentially millions of women will enter retirement with little or no pension savings.

Why is there a gender pension gap?

Sian Fisher, CEO of the CII and Chair of the Insuring Women’s Futures committee, says: “The serious financial disadvantage women face in old age cannot be attributed to any one factor but is a combination of societal, health and financial factors stacked against them.

“Women are living longer, however, care costs them more at the end of their lives. Women are succeeding in the workplace and the gender pay gap is hopefully closing, but caring for family, even for just a few short years, significantly impacts a woman at retirement. It is the culmination of all these factors that is potentially driving women towards to poverty in old age.”

Several factors contribute to the gender pension gap. One common reason is that women often fall behind in their retirement planning when they take time off to have a family. More than a quarter (26%) of mothers give up work for an extended period to look after their family, compared to just 6.9% of fathers.

Research by the Wellbeing, Health, Retirement and Lifecourse project has shown that a career break does not just have an impact on income during the time off.

In most cases, earnings never return to the level they were at before, as many returners choose to work fewer hours and this typically means they are also placed in less senior roles.

As fewer hours and less senior roles typically mean a lower salary, this also results in lower pension contributions if these are based on a percentage of salary.

Another factor that contributes to women having less pension savings in retirement is the cumulative impact of the gender pay gap. As women earn less on average than men, over time this pay gap is a major reason for the women’s pension deficit.

Historically, there have also been inequalities in the State Pension. While recent changes now mean that both men and women will have their own State Pension entitlement, accrued in the same way and paid from the same State Pension age, this historic lower entitlement has been a factor in women receiving less pension income than men.

How can the gender pension gap be closed?

There are several steps that women can take to help narrow the gender pension gap.

1. Consider contributing to your workplace pension

All employers are required by law to offer a pension scheme to all workers over age 22, who earn more than £10,000 a year.

Your employer will contribute 3% of eligible earnings and you pay 5%. With tax relief, this costs you 4% or less of earnings and gives 8% in total saved for retirement.

2. Continue paying into your pension while you’re on maternity leave

Where the pension scheme is on a salary sacrifice basis, your employer is required to pay the whole of the cost of the pension scheme, without deductions from pay. They are required to pay this, not just for the period of Statutory Maternity Pay (SMP) payment, but throughout maternity leave.

So, leaving an employer’s scheme could save you nothing and cost a whole year’s employer contributions.

While you are receiving SMP your employer must continue to pay into a pension for you and deductions will continue to be made from your SMP if the scheme is arranged on a ‘net pay’ or ‘relief at source’ basis.

3. Think about paying into your pension if you take a career break

You can continue saving into a pension plan, even while you’re not working. This can include keeping up contributions to a former workplace scheme, as long as it is a portable group personal pension, where each employee has their own individual plan.

If this isn’t an option, you can open a new personal pension.

If you have no earned income at all, you can save up to £3,600 per tax year. Remember that this will only cost £2,880 because tax relief at the basic rate is automatically added to your pension savings.

Keeping pension savings going, even at a modest level, can make a significant difference to your eventual retirement income, as savings made many years before retirement have longer to build up and to achieve compound growth.

4. Consider pension assets if you divorce

Research by Scottish Widows shows that 71% of couples divorcing ignore pension assets. After your property, a pension could be your biggest joint financial asset and so pensions should always be included in a list of financial assets when you divorce.

Since 2000, it has been possible for pension assets to be shared and for the party with less to receive a share of the other’s pension and capital assets, either by offsetting the value of pensions against other assets or through a pension sharing order.

Speak to us for advice

Do you want to ensure you have sufficient income when you retire? If so, please get in touch by email at info@thepensionplanner.co.uk or call 0800 0787 182.