What does the gender pensions gap look like in 2022?

Four people standing

It has now been a decade since auto-enrolment (AE) was launched back in 2012. With an additional 10 million people in the UK now saving for their later lives, it proves what powerful tool inertia has been. Yet, it is by no means a perfect picture as that same number (10.4 million people to be exact) are currently still ineligible for a workplace pension. 

That’s because an employee must meet the following criteria to qualify for auto-enrolment: 

  1. Be aged 22 or above
  2. Earn at least £10,000 per annum, in a single role 

The benefits of auto-enrolment are clear. Firstly, the contribution amounts for workplace pensions are currently 8%; this is a joint contribution of 5% by the employee and 3% by their employer. So, if you’re not enrolled, you’re essentially missing out on a 3% pay rise from your employer. Secondly, you may get tax relief from the government. 

Finally, and what has made auto-enrolment such a success, is that it works on inertia. Since your 5% contribution is automatically deducted from your pay, you don’t need to do anything to make it happen.  

So, missing out on AE has huge long-term implications for women

Pension saving can be difficult for women. Not only do women get paid less, but they’re also more likely to work part-time jobs or take career breaks for caring responsibilities. In fact, 75% of part-time workers are women. In the UK, almost 6 million women work part-time. Fewer working hours and reduced pay mean millions of women cannot save through a workplace pension. 

The gender pensions gap in 2022 

Since we published our first report in 2019, the pension gap between men and women has continued to widen. While the average UK pension pot has almost doubled to £111,600, women’s savings have hardly increased at all. With the rising cost of living and account inflation, women are in an even worse position. They will on average retire with one-third the pension pot of men.

UK average £57,000£ 82,200£ 111,600
MEN  £ 156,500£ 203,200 £ 205,800
WOMEN £ 51,000£ 57,500 £ 69,000
Gap (men and women)£ 105,500£ 145,700£136,800
Women’s pension wealth as a % of men32.58%28.29%33.5%

What contributes to the gender pensions gap? 

Career breaks 

Career breaks for women are the biggest cause of the gender pension savings and pay gaps. 

In general, only 27% of women work full-time throughout their careers compared to 45% of men. Women are also more likely to take up to 10 years away from work to start families and to care for children and relatives. This means loss of opportunity, career progression and higher salaries. 

The gender pay gap 

In 2021, men made 15.4% more based on average hourly earnings than women in the UK. Even if women don’t take career breaks, they will still retire with £ 156,065, 31% less than an average man’s £205,800.

Longer lives

Although men and women have a longer life expectancy, women still live on average 3.7 years longer than men. For this reason, women need to sustain their retirement income for longer. Given their current levels of pension wealth, women are more likely to exhaust their pension savings than men. 

The impact of caring on a woman’s career

Women, especially single mothers, are more likely to have childcare or caring responsibilities. During the Covid-19 pandemic, many more women had to reduce their hours or stop working for childcare. 

The cost of childcare is pricing women out of the workforce 

Despite tax changes that help families with childcare costs, prices continue to climb. The Family and Childcare Trust reported in 2021 that childcare prices for children under two had risen to £138 per week, equating to over £7,000 per year. As a result, too many people struggle to make work pay after childcare costs or are simply unable to work at all.

Although the pandemic has undoubtedly created more pressure for many women and ultimately widened the pensions gap further, it has also given us the chance to think about how we can get more women into work and help to build a meaningful nest egg for their retirement. 

It is an opportunity we cannot ignore.

Flexible working is the key to driving down the gender pay and pensions gaps

Flexible working is helping women earn (and save) more.

Employers now know that flexible working is compatible with most office-based jobs. As a result, more and more women who need this flexibility can continue to work full-time. 

Since the start of the pandemic, the number of women working full-time is up to 64% – the highest on record. This means they’re earning more, enough to qualify to be auto-enrolled in a workplace pension. 

While no one yet truly knows if working lives have changed for good, flexible working patterns benefit women disproportionately more than men. Since the single most important factor allowing women to save for their retirement is their ability to stay in the workplace, progress in their careers and earn higher salaries, we can be hopeful that this will have a positive impact on pension inequality.

Pension policies and regulations have not kept pace with the way many of us now choose to live and work, especially since the Covid-19 pandemic. 

That is why we continue to lobby the government to fix these inequalities and enable ‘under-pensioned’ groups to have the same opportunity to build their retirement pot as others enjoy. 

Find out more about our gender pensions gap work.