The Gender Pensions Gap

What is the gender pensions gap?

The gender pensions gap can mean the differences in retirement income or retirement wealth for men and women. It can be measured in different ways, for example differences in pension wealth at different ages, differences in pension income received, and the difference in state pension income.

As well as concerns about the impact on equality, the gender pensions gap interacts with differing life expectancies between men and women and changes in policy over their lifetimes. On average, women live longer than men and so on average need more pension wealth to have the same amount of income each year over their retirement. In addition to this, pensions are built up over a lifetime and so there is a time lag in policy changes to affect pension wealth or pension income.

What factors influence the gender pensions gap?

Gender pay gap

As highlighted in a report by the Pensions Policy Institute in 2019, the gender pensions gap is mainly caused by the gender pay gap, which is usually defined as the difference between average hourly earnings between men and women. This is due to several issues, such as:

• different working patterns (for example taking time off work for caring responsibilities, or working part time)
• different earnings (women on average earn less than men).

For more information on the gender pay gap, please see the Commons Library briefing, The gender pay gap.

Other factors

There are other factors relating specifically to pensions that may cause the gender pensions gap, including:

• differences between men and women in the type of scheme in which they are more likely to participate
• historic State Pension rules resulting in different pension outcomes for men and women
• the impact of how people are enrolled into pensions can affect men and women differently due to differences in their employment patterns
• how divorce settlements treat pensions

Progress on changing the gender pensions gap

The Work and Pensions Committee inquiry Saving for later life included a review of measures to close the gender pensions gap.  The report, published on 30 September 2022, looked at a range of issues, including a carers’ credit, the earnings trigger for auto-enrolment, tax relief for non-taxpayers, pension sharing on divorce, and the high income child benefit charge. The Government published its response on 23 January 2023, and accepted some of the Committee’s recommendations, including the development of a measure for the gender pensions gap. Some suggestions for reducing the gender pensions gap are described below.

Government reporting on the gender pensions gap

The Government introduced a measure of the gender pensions gap in June 2023, and confirmed that it would report on this annually. There have been calls for a government action plan alongside the measure.

Changes to auto-enrolment

Employees who earn more than £10,000 are automatically enrolled into a workplace pension (unless they opt out). Employees who earn less than the £10,000 earnings trigger do not get automatically enrolled, and this affects more women than men due to their working patterns. There have been calls to review or reduce the earnings trigger or to reduce or remove the lower earnings limit (the level at which pension contributions start to be paid). The Pensions (Extension of Automatic Enrolment) Act 2023 gave the Secretary of State the powers to reduce or remove the lower earnings limit.

Support for childcare

The Government has introduced a number of reforms to childcare in recent years, aimed at helping more women with childcare responsibilities to be able to work.  This would help reduce the gender pay gap, and therefore reduce the gender pensions gap over time.

Proposals for reform

Carers’ credit

At present, anyone in receipt of child benefit for a child under the age of 12 will get National Insurance credits towards their state pension automatically. The Pensions Policy Institute suggested in their 2019 report, Understanding the Gender Pensions Gap, that a ‘family carer top-up’ in addition to National Insurance credits could help women build up their pension. The Government does not have any current plans to introduce this.

Pension sharing on divorce

Pensions are usually people’s second biggest asset after a house. Pension wealth falls following divorce and the reduction in wealth is bigger for women than for men, yet pensions are often not considered during divorce. The Government told the Work and Pensions Committee that it has been working on identifying the barriers to better data in this area (PDF).

Pension sharing for couples who are not married or in a civil partnership

The Women and Equalities Committee in 2022 recommended better legal protection for couples who are not married or in a civil partnership. The Government responded to this by saying they wanted to first complete their work on the laws of marriage and divorce, as this would create a new baseline of rights.