What is Gender Pension Gap?

Full Definition

The gender pension gap describes the gap between the average pension wealth or retirement income of men and women in the UK, which studies have consistently found to be substantially wider than the gender pay gap in current earnings. It arises from a combination of factors that compound over a working life: women are, on average, more likely to take extended career breaks for maternity leave and childcare, more likely to work part-time (often precisely because auto-enrolment and workplace pension contributions are based on actual earnings, so part-time and lower-paid work generates smaller pension contributions), more likely to work in sectors with lower average pay or weaker pension provision, and more likely to live longer in retirement, meaning any given pension pot has to be stretched further. Auto-enrolment has narrowed the gap in workplace pension participation rates between men and women considerably since its introduction, since eligible employees are enrolled automatically regardless of gender, but it has done far less to close the gap in the actual value of pension pots, because contributions are calculated only on qualifying earnings and someone who works part-time, takes a career break, or is self-employed (self-employed people are not covered by auto-enrolment at all) will accumulate a smaller pot even while participating fully in the scheme available to them. Divorce can also affect the gap significantly, since pensions are frequently the largest or second-largest asset in a marriage but are not always addressed adequately in a financial settlement, particularly where one partner reduced or gave up paid work to support the other's career or to care for children. Addressing the gap is generally understood to require action on both sides -- narrowing the underlying gender pay gap and improving pension coverage for part-time and self-employed workers -- rather than any single pension-specific fix.

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