The Gender Pension Gap

This Briefing Paper is about the gender pension gap. There is no official measure of the gender pension gap, but this is generally understood to refer to the differences in retirement outcomes for men and women. Many approaches to defining the gender pension gap refer to the difference in retirement income of men and women. Although estimates vary, the difference in retirement income between men and women is larger than the gender pay gap. Written evidence from the Trade Union Prospect to the Work and Pensions Saving for later life inquiry states that the gender pension gap is: ‘significantly larger than the gender pay gap and applies to a large (and growing) proportion of the female population’. (Written evidence from Prospect (PSL0025), 2022, at p.7).

Other analysis of the gender pension gap examines the difference in wealth in retirement.

There has been recent policy interest in steps to reduce a gender pension gap. For example, this is one of the questions asked by the Work and Pensions Saving for later life inquiry that was launched in December 2021.

The gender pension gap is much larger for private pensions than state pensions. The literature on the gender pension gap highlights three main causes of this gap.

• Labour market factors. Women are more likely than men to spend time outside the labour market or be in part-time employment to undertake unpaid caring for young children or relatives. This pattern of labour market participation impacts on the gender pension gap in two ways. People do not usually contribute to private pensions in periods outside of the labour market. The greater likelihood of women to be in part-time employment also contributes to a gender pay gap and this gender pay gap then filters through to the gender pensions gap.
• Demographic differences between men and women. Women tend to live longer than men and so are more in need of retirement income and to make savings last longer to avoid poverty in retirement. Another issue concerns the treatment of pensions in divorce proceedings.
• Design of pension systems. One example of this refers to the design of automatic enrolment into a workplace pension in the UK. The design of automatic enrolment widens the gap between lower and higher earners in retirement and disadvantages those in second jobs.

Proposed reforms to cut the gender pension gap are directed at each of the different causes of the gender pension gap. Proposals to address the gender pension gap include the following:

• Provision of affordable childcare for pre-school age children.
• Make pension rights a compulsory part of divorce proceedings.
• Reduce the earnings trigger under automatic enrolment in a workplace pension as more women than men tend to be excluded from this policy by the earnings trigger.