Closing the gap: women, pay and pensions

Why the gender gaps persist

The most recent government figures put the gender pay gap at 6.9% for full-time workers. While this headline figure has fallen by a quarter over the past decade (the gap was 9.4% in 2016), it is an average rate. That means it masks some bigger pay inequalities among specific groups of women, including those over 40, and higher paid women³.

The gender pay gap in this case is defined as the difference between the median average hourly earnings (excluding overtime) of men and women.

Lower average rates of pay and structural differences in the working lives of women lead to an even bigger gender pensions gap.

Department for Work and Pensions figures show for those around normal minimum pension age (aged 55 to 59), the gender gap for private or personal pension savings is 48%⁴.

The DWP’s measure is the difference between female and male median uncrystallised private pension wealth.

And while auto-enrolment into workplace pensions has addressed some issues around the lack of pensions saving, a gender gap exists here too. In the private sector, 76% of female employees are members of a company scheme, compared to 81% of male workers⁵.

To be eligible for auto-enrolment workers need to have annual earnings of £10,000 or more from a single role. But as women are more likely to work part-time and be on lower wages than men, many are losing out on workplace saving.

Add in the fact more than half of women (56%) have taken a break from paid employment, compared to 38% of men⁶, and it’s easy to see why many women face challenges in building up a decent pension pot that will give them a comfortable retirement.

Far fewer women (27%) invest compared to men (43%). And among those who do, men are almost twice as likely to have been investing for more than five years (28% versus 15%)⁷. Yet while the gender pay gap is a big factor behind the lack of investing by women, it is not the full story.

Further life changes, such as divorce and bereavement, can exacerbate the problem for many women, causing financial disadvantages in retirement.

According to research from NOW:Pensions, divorced women hold just 39% of the pension wealth of divorced men, with the median pension wealth for divorced men standing at £85,800, compared to £32,640 for divorced women⁸.

Missing out on compounding

Alex Loydon, Group Advice Director at St. James’s Place (SJP), says: “Financial inequality due to the gender pay gap, combined with structural barriers, such as women being more likely to take career breaks, not asking for pay raises or not applying for a role for fear of not ticking all the boxes, put women at a financial disadvantage, on average, compared to men. There is additional loss on top, because women lose out on the growth potential from compounding on their pension contributions over time.”

Compounding is extremely valuable in long-term investing as it is the process whereby investment growth or savings interest is reinvested back into the savings pot, with growth or interest earned on it. There are no guarantees with equity investments that your money will grow. Returns can fall as well as rise. But compounding can potentially make a substantial different to investment growth over the long-term.

To put this in context, a woman taking a five-year career break at the age of 50, for example to care for an elderly parent, would retire with around £21,000 less in their pension pot compared to if they had continued paid work. A woman with no career break would have a pension pot of £238,632 at age 68, in contrast to a pension fund of £217,581 for the woman who took a five-year break at 50⁹.

A five-year career break at 30 can have an even bigger impact, reducing a projected pension fund at 68 from £238,600 to £207,700, a shortfall of around £30,900. Closing that gap after returning to work would require total pension contributions to rise from 8% to around 9.72% of pay¹⁰.

The figures, from SJP’s Women and wealth report 2026, assumes pension contributions from age 21 with no other breaks, an 8% combined employee and employer contribution with investment growth reinvested, inflation at 2% and pay growth at 3% and investment growth at 5%.

It is important to note that the figures used here are examples for illustration purposes only and they are not guaranteed. They also don't reflect any minimum or maximum amounts. What you get back in pension saving depends on how your investment grows and the tax treatment of the investment. You could get back more or less than this. 

Career breaks later in a woman’s career can also be potentially more damaging as there is less time to make up the lost savings before retirement.

Alex adds: “The pensions system is built on the traditional and typical working patterns of men. But that means many women who take time out of the workplace can be severely financially penalised over time. They are not able to build up a sufficient pension pot to give them a comfortable retirement.
“However, women can take steps to redress the balance. This is where having a clear financial plan and taking proper advice can help, particularly when navigating through the ups and downs of life.”

Closing the gaps

For many women thinking about their pension saving, and potential gaps, can be overwhelming. This can be particularly true for those who are closer to retirement and who may have already taken career breaks which have impacted their ability to save.

But it is never too late to start to address the issue.

Working towards closing gaps in retirement saving and thinking about a strategy for managing income and wealth in later life can make a big difference.

1. Understand your current position: Get hold of pension statements and forecasts for all your pension pots, including your state pension forecast. This will give you a full picture of your financial position right now.
    
2. Take action: Once you know your retirement income projections you can plan, thinking about different ways to boost savings, particularly if you think you will have a shortfall. The sooner you can start to plug any gaps, even small increases to saving each month, the better your retirement income will be. Talking to a financial adviser can help you map your goals and work on a plan.
    
3. Build financial resilience: We can’t know what life is going to throw at us, but being prepared financially for unexpected life changes can smooth the path. This might be protection policies, for example, which can provide a financial safety net in the event of job loss or serious illness. For women planning a career break, to have children, for example, making provision for this by saving more into a pension in the years before they start a family can be a prudent step. This can help mitigate lost pension contributions during an extended career break.
    
4. Regular reviews: Looking at pension and retirement projections isn’t a ‘once and done’ job. It is important to regularly review contribution levels and your overall financial plan, typically once a year, to ensure it is still on track to meet your goals.

Sources

¹Office for National Statistics. National life tables – life expectancy in the UK: 2022 to 2024. 10 December 2025
^{2, 3}Office for National Statistics. Gender pay gap in the UK: 2025. 23 October 2025
⁴Department for Work and Pensions, Gender pensions gap in private pensions: 2020 to 2022 - July 2025.
⁵Office for National Statistics. Employee workplace pensions in the UK: 2024 provisional and 2021 to 2023 final results - 10 March 2026
^6,7St. James’s Place. Women and wealth report 2026 - 24 June 2026. On behalf of St. James's Place, Opinium surveyed 6,000 UK adults nationwide between 17 March and 9 April 2026. Quotas and post-weighting were applied to the sample to make the dataset representative of the UK adult population. 
 ⁸NOW:Pensions, Research from Mercer’s now:pensions and the Pension Policy Institute highlights 61% pension gap for divorced women in the UK – 5 January 2026
 ^9,10St. James’s Place, Women and wealth report 2026 – 24 June 2026. St. James’s Place. Women and wealth report 2026. June 2026. Opinium surveyed 6,000 UK adults nationwide between 17 March and 9 April 2026. Quotas and post-weighting were applied to the sample to make the dataset representative of the UK adult population.