Gender pension gap starts at 28, new research shows

The gender pension gap in the UK begins as early as 28, new research shows, with pension contributions between men and women typically taking very different paths from this age onwards.

Women in the UK currently retire with 48% less retirement savings than men, according to data from HMRC. But new research by AJ Bell has found the gap starts widening very early in adulthood, with women typically earning less than men from the start, and then turns dramatically around the age of 28 at a point where many women make significant life choices like taking time off work to raise children.

Charlene Young, senior pensions and savings expert at AJ Bell, said pension priorities typically begin catching up around the age of 41, but by that point, a lot of damage has already been done, as women have lost out on years of compound growth.

“It’s impossible to ignore salary differences. Government data tells us that women working full time are paid, on average, 6.9% less than men. That’s a sizeable difference in take home pay, but it also means that women are paying less into their pension each month, which has a snowballing effect on their pension pot over time,” she said.

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“As many women take career breaks to have children or to care for family, cracks start appearing from missed or lower contributions in the key years when pension growth is so important. These cracks manifest as a chunky gender pension gap when it comes to retirement.”

However, Young said that this data could help provide insight into the best ways that the government and pension providers can work towards closing the gap. For example, closing the gender pay gap, focusing on more incentives to save into pensions, and changing framework around auto-enrolment.

“Pension providers should highlight the benefits of pension saving, including employer contributions, tax relief and the long-term impact of compound growth. Providers should also raise awareness of how pensions can support eligibility for allowances and childcare benefits, including child benefit,” she said.