Since our recent post about saving for retirement and pension planning, the office for National Statistics (ONS) has released further information highlighting how the retirement income gap has been dramatically impacted through COVID. Although it may be decreasing slowly, as long as the gender pay gap continues to live on, so too the gender pension gap will also continue.

How does the gender pay gap affect the gender pension gap?

The gender pay gap is, in simple terms, the difference in hourly rate or rates of pay between the two genders.

The ONS research also referred to the three year difference in life expectancy between men and women (84 for males versus 87 for females – of course with chances of survival for some taking them both into their 90’s). This means that if a woman stops work at 67 years old, she will have an average of 20 years in retirement. Equating to over a sixth longer than her male counterpart.

With the expectation of women making larger pension contributions to make up for the additional retirement years, you would also expect on average that women would have a larger pension pot. However, the gender pension gap is proving this is not necessarily the case.  


Because of the gender pay gap. In fact, the recent studies by the Centre for Economics and Business Research (Cebr) have reiterated that women aged 55 and over contribute more to their pensions than men (9.4% of income against 8.3%). Yet their respective pension pots are much smaller because their average earnings are 35% less. This could be because of career breaks for family, or taking on part-time roles and self-employment. But for whatever the reason, the fact is that the gender pay gap is still widely evident, therefore, the gender pension gap also clearly apparent.

What does this mean for your savings and potential pension income?

It could make a difference of almost £184,000!

Yes, in terms of the total pension income received, the Cebr has calculated that women could be this much worse off than men in their retirement. And with the likely cause being the pandemic, this figure is £26,500 greater than just one year ago.

We know the HMRC data shows a higher number of women than men being furloughed between July and December 2020, even though men are more than twice as likely to be employed than women. It is believed that this is partially due to the fact that more women than men work in retail for instance, just one of the sectors hardest hit by lockdown.

The current situation is implying that the gender pension gap has plenty of life in it yet, unfortunately. So, if women are wanting to remain in a financially stable situation as individuals, it is vital you start to look at your options sooner rather than later.

How can you take back control of your retirement?

We mentioned previously that it is never too early to start planning for your retirement. With this new information in mind, whatever your gender, we would highly encourage you to start monitoring your projected pension benefits, and take relevant action to ensure your pension income is sufficient to allow for at least some comfort and flexibility during your retirement.

Data from 4 million Legal and General pension scheme members revealed that the typical gender pension gap is 17% at the start of a woman’s career, compared to men, rising up to 56% at retirement. And women have an average pension pot of £10,000, compared to more than double that for men of around £21,000.

There are a number of options to help you fully understand the current value of your pension pot, or how to get you back on track with pension contributions. Some are actions you can take yourself, others involve third party guidance:

  • Seek expert financial advice - referring to an Independent Financial Advisor such as the team here at Simpson Financial Services, will enable you to assess your current financial portfolio, existing pension pot, but also provide you with clear and reliable, unbiased financial advice on next steps.
  • Check your National Insurance Contributions (NICs) – 10 years is the minimum NIC “qualifying years” to claim any state pension, with 35 years’ worth to receive the full state pension. The Department for Work and Pensions estimate 1.6m lost pension pots, holding £19.4bn. So, if you are in doubt, tracking down any lost pensions could turn out to be quite lucrative!
  • Increase your contributions – a) paying into your pension during maternity leave means you will pay only a percentage of your income whilst on leave, maintaining your employer’s usual contribution; b) topping up your pension before any career break; or c) pay into a pension even if you are not working, if you can afford to do so. You can save up to £2,880 per tax year (based on 2021-2022 tax year), plus you will receive an additional £720 through government tax relief.
  • Check your drawdown options and charges – here at Simpson Financial Services, we ensure you are in the best financial position for your personal circumstances. We give you an appropriate level of detail to allow you to make an informed decision as to which policies, plans, and schemes are right for you. This will always include assessing any charges or penalties. And the same applies for your existing pension plans. Checking your options for withdrawal could make a huge difference, so be aware of the details and requirements to ensure you get the best at all stages of your life and into retirement.

Another option would be delaying your state pension. Although this will have a minimal positive impact, increasing your pension by around 1% overall, and is only viable if you are in good health and want to continue working into later life.

Of course, the above options by no means eradicate the gender pension gap. They are merely methods by which you could improve your retirement income.

How can I arrange expert financial advice from Simpson Financial Services?

It is clear that the gender pension gap might not disappear, certainly not in our lifetime, but there are some steps you can take to get back in control of your finances and to create a more secure future.

With many years of experience in all areas of financial planning and advice, between us, we can take you from your very first savings account right through to planning your estate and making a will.

So, if you would like to seek further independent financial advice regarding your pension contributions, pension plans, or in planning for your retirement overall, our friendly team are here to discuss the most efficient and appropriate products to suit your circumstances.

Call us or arrange to pop down to the office for your initial discussion, and although we might not be able to solve the problem of the gender pension gap, we will be able to offer you the best financial advice to work around it!