UK women have up to 45% less in pension at retirement than men

The UK pensions system disadvantages women compared to men, with females having between 25% to 45% less in their pension pots at retirement, new data has shown.

According to analysis from professional services consultancy Barnett Waddingham, the gender pension gap begins to diverge most after the age of 32, with men contributing up to £1,500 ($2,068) per annum more into their pension than women.

This is despite contributing the same percentage of their salary.

The research, which analysed the data and saving trends of some 35,000 members in seven defined contribution (DC) pension schemes, found that the gender pensions gap is caused by several factors, including the gender pay gap.

Watch: When should I start paying into a pension?

The findings highlighted that the pensions system is failing to support mothers, as the impact of career breaks is a driving factor behind women having less pension savings.

For a woman taking two 12 month career breaks in her early 30s, with no increase to pension saving or salary during this time, she can end up having 10% less in her pension pot at retirement compared to a woman with no breaks.

A 35-year-old would need to increase contributions by an additional 1% of pensionable pay to make up this shortfall. A woman waiting until she’s 55 will need to increase contributions by around 6% of pensionable pay.

READ MORE: One in four women 'suffered income fall' due to COVID-19

In some schemes, there are three times more women than men earning less than £10,000 per annum – under the auto-enrolment threshold.

In addition to this, women also contribute to pensions less than men on the whole. From their mid-50s, women typically increase their contribution rate higher than men, generally at around an additional 1% of pensionable pay.

Barnett Waddingham said it was common for people to engage more with pensions the older they get and that women closer to retirement realise the need to catch up with their savings.

Whilst men and women are generally saving less than required to provide for a sufficient income in retirement, the gap amongst women is more pronounced.

Men are 10-25% more able to fund the PSLA Living Standard income than women across all affluent groups – the measure of how much people need to afford their desired lifestyle in retirement.

READ MORE: UK households living in poverty hit record high pre-pandemic

“The UK private pension system was born in a society very different to today, during the early 1900s at a time when women typically stayed at home, predominantly men went to work, and they generally remained with the same company for many years,” Amanda Latham, policy and strategy lead at Barnett Waddingham, said.

“Whilst society has evolved, the pension system has not, at least certainly not at the same pace. Mainly focussing on the needs of the ‘traditional nuclear family’, the design has not changed to reflect the way we live today.

“As such, the system is intrinsically biased towards men, creating a stark disparity in wealth at retirement.”

Barnett Waddingham said that employers can consider five things to close the gender pensions gap; taking advantage of inertia - setting higher default contribution levels for when employees enter the pension scheme; addressing the shortfall after career breaks; introducing more targeted financial education; addressing the gender pay gap; and encouraging staff to pay in more when affordable to do so.

Women across the world are still paid 23% less than men. Britain is in the top three leading countries that report on the gender pay gap along with Spain and Italy. Spain tops the list, with 82% of companies publishing gender-segregated pay information, 78% of companies in the UK publish, and in Italy, 55% of companies release such information.

Watch: Why do we still have a gender pay gap?