Is the gender pay gap impacting Pension performance?

Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.

Is the gender pay gap impacting Pension performance?

The gender pay gap is the topic on everyone’s lips. The government set a deadline of April 4th 2018 for businesses with more than 250 employees to publish their pay gap information. Now that the date has passed, we can see clear imbalances in UK pay scales.

In total, some 10,000 firms have disclosed the gender pay gap within the workplace — so what were the key findings? Based on the median pay gap, 78% of companies were found to pay men more than women, while just 14% were in favour of women and 8% paid equally. On average, men are paid 9.7% more than their female counterparts.

Many attribute the pay gap to a difference in roles between the genders. Overall, just one in three companies has a majority of women working in their highest paid roles, which are largely dominated by men.

With a large proportion of women at a disadvantage in terms of salary and bonuses, another issue is growing: the pension gap. Are women’s lower earnings impacting how much cash they have available to set aside for retirement? And are men likely to be more comfortable in later life?

Pension performance: men vs. women

Although the majority of the discussion has centred on the gender pay gap, the pension gap should be a very real concern for savers. After all, failing to build up the funds you need in retirement can impact the overall quality of life you have in the future.

An example from Telegraph Money in association with Prudential nicely illustrates this disparity. If a 25-year-old man and a 25-year-old woman both paid into a pension for 40 years with the aim of generating an annual retirement income of £25,000, the male would only have to save approximately 10% of his salary, while the female would have to save in excess of 13% of her wage. As women overall earns less than man, they need to contribute a greater proportion of their salary to accumulate the same amount for retirement.

Gaps in employment could also have an impact on a woman’s pension performance. For example, women may take time off work to have children and care for others. Or, once they’ve had children, they may choose part-time work over full-time employment for the flexibility it offers family life. In situations where women aren’t working, many often don’t contribute to their pensions, which will again limit the amount available to them in later life.

Also consider that women live longer than men in the UK on average — 65 year olds in the UK in 2014 were expected to live to age 83.5 for men and age 85.9 for women. With almost two and a half more years on their life expectancy, women should actually be saving more than men in order to prepare them for retirement.

Addressing the pension gap

So how can we address the pension gap? Hopefully, through increasing visibility of a business’ gender pay gap, companies will take steps to equalise pay between the genders. In theory, by earning more, women will have more cash available to contribute to a pension, helping them build up the funds they need for later life. Of course, other influencing factors will have an impact on this.

Aside from narrowing the gender pay gap, how can women ensure they’re building up the savings they need to fund their retirement lifestyle? Personal pension provider True Potential Investor believes increased visibility of their pension pots is crucial for driving pension savings.

Because retirement is a long way off, many people regardless of gender push their pension savings to the back of their mind — which, if left forgotten about, can lead people to only realising when it’s too late how far removed the reality of their pensions are from their expectations. True Potential Investor’s app gives pension investors 24/7 access to how their pension is performing.

Pension awareness is on the up in the UK, although more still needs to be done in terms of education. Some people find it difficult to estimate how much they’ll need in retirement — an important factor when determining how much you’ll need to set aside to see you through later life.

Getting these estimates wrong could mean your pension pot falls short, leaving you working longer or even running out of cash during your retirement. With effective planning, you can ensure your savings and retirement expectations are aligned. Financial advisors and pension advisory services will be able to support you, should you need any additional guidance.

In addition to the above, women can strengthen their retirement fund by avoiding any gaps in their savings. Should a woman need to take time away from work, where possible, they can still contribute to a pension scheme, as well as having the option to make voluntary national insurance contributions. Doing so will help minimise the impact of missed payments on a woman’s pension.


With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. This blog is not personal financial advice.

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