By the time they reach retirement age, women may experience a gender pension gap more than £85,000 However, this disparity begins as soon as they start working
We examine five strategies to increase your pension in advance of International Women's Day on March 8.
Most people don't save enough for retirement, but because of the gender pension gap, women are especially vulnerable to pension shortfalls. The average woman retires with a pension pot that is about 45% smaller than a man's, making it one of the largest wealth disparities that women encounter.
According to data on pension wealth released by the Office for National Statistics (ONS) in January 2025, the average man had 191,600 at retirement age between 2020 and 2022. In contrast, the average woman had 106,300, a 45 percent disparity of 85,300.
According to ONS data, the pension gap starts as soon as women start working, even though these numbers were the median values for people 65 to 74. Men and women are separated by 26% in the 1624 age group, and by 45% in the 2534 age group.
"When it comes to accumulating pension wealth, women continue to encounter numerous and structural obstacles," stated Camilla Esmund, senior manager at investment platform Interactive Investor. "They are more likely to work part-time or take time off to care for loved ones, which could result in a smaller pension pot in retirement and lifetime contributions that are lower.
Women are disproportionately responsible for caring for both young children and aging parents, and this frequently occurs at both ends of their careers. Due to a lack of understanding and flexibility, some women in their 40s and 50s may be forced to leave the workforce as they deal with the medical effects of menopause, frequently at a time when they are rising to the top of the corporate ladder.
The issue is twofold when you take into account that the gender pay gap already causes the average woman to earn less. First, their contributions are lower, and then, due to career breaks, some women are unable to contribute to their pensions for extended periods of time.
Additionally, investment compounding, or "returns on returns," causes the pension gap's impact to grow over time. A "massive wealth gap by retirement can result from even a small income gap early in a career," according to Esmund.
While employers and legislators have a responsibility to make retirement savings more equitable for women, there are also actions you can take to strengthen your own financial stability. There has never been a better moment to begin putting these positive habits into practice than now, as International Women's Day draws near on March 8.
Average pension pot for men and women by age.
The average pension pot value for men and women of different ages is revealed by ONS data. As you can see, the pension gap begins when women first start working but gets wider in their mid-20s and early-30s, when many of them take maternity leave or take a break from their careers to care for young children.
"Considering that the average mother in the UK is thirty-nine years old, if their pension contributions are irregular or stopped completely, that is thirty-six years of compound interest that women are losing out on, which will ultimately result in a significant deficit in their final retirement pot," said Carina Chambers, pensions technical expert at digital wealth manager Moneyfarm.
Source: The January 2025 ONS survey of Great Britain's total household wealth, conducted from April 2020 to March 2022.
There are five ways for women to increase their pension.
1. At an early age, begin saving for your pension
As they say, "time in the market is more important than timing the market" when it comes to building wealth. Therefore, even though retirement seems far off, you should begin saving for your pension as soon as you can.
According to auto-enrollment regulations, employers in the UK are required by law to offer pension plans to their employees. If you are 22 years of age or older and make at least 10,000 per year, you will be automatically enrolled as soon as you begin working.
In addition to your employer's required minimum contribution of 3 percent, you will automatically begin contributing 5 percent. Although you can choose to reduce your 5 percent contribution or opt out, doing so may also result in the loss of your employer's contribution, which is effectively free money.
Additionally, you will lose out on the chance to earn substantial investment returns, which should compound over the course of your investment horizon.
2. Boost your pension contributions
If you can, you should think about increasing your pension contributions in addition to keeping your current 5% contribution.
To build wealth, the best strategy is to invest consistently over a long period of time. Even with high interest rates, research indicates that investment returns nearly always outperform cash in the long run, despite the temptation to keep the money in your bank account for easy access.
By retirement, even a modest increase in your pension funds could have a significant impact. Rounding your monthly pension contributions to the nearest hundred could increase your retirement pension by 64,000, according to research released in 2024 by the financial services company Standard Life.
Standard Life's calculations are predicated on a starting salary of £25,000 at age 22, 3 percentage points of annual salary growth, and 8% pension contributions under auto-enrollment regulations (5 percent employee, 3 percent employer). They also factor in a 1% yearly management fee and a 5% investment growth rate.
Although the impact of a career break is not taken into account in the research, women should find that increasing their contributions during their working years lessens the overall impact of a break.
3. Ask your employer if they will contribute to your pension
Some employers will match your pension contributions up to a certain amount if you contribute more to your pension. Seize this opportunity if it presents itself. Once more, it can assist you in closing the pension gap and is essentially free money.
4. If you can, make contributions to your pension while on maternity leave
Women frequently take time off for maternity leave or to take on caregiving duties, which can significantly reduce their pension fund.
Based on your pre-leave salary, your employer will continue to contribute to your pension while you are on maternity leave. But the amount you contribute will depend on your maternity pay, which is probably going to be lower.
Furthermore, you will only be eligible for employer contributions for the final 26 weeks of your maternity leave (Additional Maternity Leave) if you are still receiving maternity pay, even though they are guaranteed for the first 26 weeks of your maternity leave (Ordinary Maternity Leave).
You should keep making pension contributions during your maternity leave if you can afford to. Rather than letting your contributions drop to a portion of your reduced maternity pay, try to keep them at the level you were making prior to taking your leave.
5.
Is it possible for your spouse to increase your pension contributions? Discuss with your partner whether they can make contributions to your pension during the time you take off from work to fulfill caregiving duties, such as watching small children.
To make sure you are in agreement regarding your financial situation, it might be worthwhile to have this discussion prior to choosing to have children. 42 percent of men would not be willing to contribute to their partner's pension while on maternity leave, according to recent Moneyfarm research, with 27 percent of respondents stating that the woman's pension is her own responsibility.
According to Chambers, "these numbers demonstrate a substantial disparity in financial assistance and shared accountability within households." True gender equality can be attained by promoting candid discussions about financial planning and the value of helping one another reach their long-term financial objectives. All women can have the financial stability they are entitled to, both during and after maternity leave, if we are united.
Additionally, it is important to keep in mind that a pension is a tax-efficient retirement investment and savings option. Therefore, a good strategy to hide your combined wealth from the taxman is to increase your spouse's pension.
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