Women retire with less. It’s time for change. Learn why the pension gender gap exists and how TILLIT can help bridge the gap.
The pension gender gap is the substantial difference in pension savings between men and women. Recent data shows a 35% gap in uncrystallised, median, private pension wealth between genders around the standard minimum pension age, with women being worse off than men (1). If we were to include individuals without any private pension savings at all, the gap would be even wider according to the Department for Work and Pensions (DWP), as there are more women than men without any private pension savings (2).
There are a number of reasons for and drivers of the gender pension gap. Here we explore them in more detail and share how we have built our pension at TILLIT to combat this problem, with practical tools to help close the shortfall and secure a better financial future for women.
Several factors contribute to the pension gender gap, many of which are rooted in long-standing economic and social inequalities. In this section, we’ll explore the key drivers behind this disparity and how they impact women’s ability to build sufficient retirement savings.
The gender pay gap, which measures the difference in average hourly earnings between men and women, plays a significant role in the pension gender gap. In 2023, the median pay for women was 14.3% less than men (3), and this disparity directly impacts their pension contributions.
One of the key drivers of the pay gap is the difference in working patterns—women have historically been more likely to work part-time or take career breaks for caregiving responsibilities, leading to lower overall earnings and lower pension contributions over time.
While auto-enrolment has led to increased pension savings across society, including women, the benefits have not been equally shared between genders.
For example, women have typically been disproportionately affected by the earnings threshold. More than 10.9% of women earn less than the annual auto-enrolment qualifying limit of £10,000pa, compared to only 4.3% of men (4).
It’s also more common for women to hold multiple part-time jobs and due to the auto-enrolment threshold applying to each job individually, they are less likely to meet the criteria of auto-enrolment despite having a total income above the threshold.
Despite pensions often being the second-largest asset after property, they are often overlooked when spouses negotiate a financial settlement. A shocking 70% of divorces include no pension division at all (5).
Women tend to be more hard hit by this than men as they tend to be the spouses who will have sacrificed their own pension as a result of taking leave or going from full-time to part-time to look after and raise a family. A decision which may cost them dearly later in life, exacerbated by their spouse’s pension not being included in the divorce proceedings.
Furthermore, even if the pension is included in the negotiations, the common practice of pension offsetting, where pension values are traded for other assets like the family home, often leaves women in particular at a disadvantage, as they tend to prioritise immediate needs over long-term pension security, further widening the gender pension gap. As a result, following divorce, pension wealth typically falls by 50% for women, but only 33% for men (6).
Research has shown that women are less likely to engage with financial products like pensions, which directly impact their retirement savings than men.
For example, 60% of women do not have a plan for their retirement finances, compared to 44% of men. In addition, 59% of women feel they don’t understand enough about pensions, versus 43% of men (7).
The latter may be due to a combination of lacking confidence as well as financial education, issues that plague both men and women, but seemingly more women.
At TILLIT, we know that while pension providers alone can’t solve the pension gender gap, we have a vital role to play in helping bridge it. To deliver long-lasting change that impacts all women, the government, regulators and the industry need to work together to reform the system.
However, in the meantime, we’re committed to empowering women with practical tools to help bridge the gap and improve long-term financial security.
And whilst this issue predominantly affects women, the practical tools that come with the TILLIT Pension can help anyone taking meaningful time out of work, or for any other reason they need to temporarily pause or lower their pension contributions.
At TILLIT, we focus on breaking down the barriers to making great long-term investment decisions, no matter your background. Unlike other platforms with thousands of options and information covered in jargon, TILLIT selects only the best-in-class funds and provides accessible executive summaries in plain English, making picking what to invest in easy and engaging.
Our proprietary due diligence criteria and research process have been developed by professional money managers, which means that every fund on the platform is pre-vetted. Our tone of voice and visual approach to deliver key information engage the user and empower them to make informed decisions. By reducing complexity and focusing on quality, we help everyone make informed investment decisions with confidence.
One of the key drivers of long-term returns is asset allocation. In simple terms, that means the balance between assets that grow your money and assets that protect your money. The shift in focus from growing our money early on to protecting it more and more as we approach retirement happens gradually, and usually automatically if you are invested in what is called a ‘default fund’.
If you plan to be out of work for an extended period or reduce your working hours to balance caring for your family, you will typically contribute less to your pension during that time. As a result, you will accumulate less in your pension pot and the need to grow that money is therefore higher than if you hadn’t made that sacrifice. This means that the standard, one-size-fits-all philosophy of reducing the focus from growing your money to protecting it solely based on age doesn’t always fit. Personal circumstances mean that individuals in this situation may want to adjust their asset allocation to focus on growth for longer.
At TILLIT, we give you that choice. Ultimately it is up to you, but because we know that everyone is different and personal circumstances vary between people and over time, we give you the opportunity to make the tweaks that fit your goals and requirements.
Even the most generous parental leave policies may not cover your full pay for the time you are away from work to look after your family. As a result, your pension contributions may suffer as well. While it may not feel like a big sacrifice in the short term, even a temporary reduction in your pension contributions can have a significant impact over the long term. Sadly, most workplace pensions aren’t set up to help you manage this.
At TILLIT, we recognise the importance of protecting your pension during this crucial time for your family.
One of the great things about the TILLIT Pension being a personal pension account is that it’s more flexible in how contributions can be made, and by whom. When your employer’s contributions reduce or pause you can continue to contribute to your pension directly, at your own pace, ultimately reducing any shortfall.
With TILLIT, you and your family are in control and have the power to protect your financial future, just like you protect your family.
When you come back to work after an extended period of leave or reduced hours, there are a million things to focus on and your pension is typically at the bottom of the list - if on the list at all. The assumption is that your pension contributions are increased again in line with your working hours and you are back on track. But depending on how long you have been away and whether or not a loved one has been able to support your pension savings in the meantime, simply resuming your standard pension contributions will likely not be enough to repair the long-term financial impact.
The problem is that whilst you can increase your pension contributions beyond the standard or minimum rate in most pension schemes, it requires effort, time and general life admin. You have to decide how much you want to increase your contributions, and for how long, then inform your HR department or the like. Most people don’t get that far, even if they have the willingness to save more, even if for a temporary period.
At TILLIT, we want to make catching up as frictionless as possible and that is why we offer the ability to increase your rate of auto-escalation from the standard 1% pa to 2%, or even 3% over the first three years when you return to work. All you have to do is increase your auto-escalation level at the click of a button. If only all life admin was that easy!
The gender pension gap is not something that only affects women, it affects society as a whole both financially and culturally, and unfortunately, it’s a significant enough issue that it will take time to eliminate entirely. We can’t afford to wait for that, so it’s time to be proactive and speed things up by taking matters into our own hands.
If you want a pension that can support you while you make the sacrifice to care for others, you can open a TILLIT Pension account today by clicking the button below. Alternatively, you can speak to your employer about offering TILLIT to you and your colleagues alongside your current pension provider, or ask us to get in touch with them.
If you are an employer who cares about this issue as much as we do, speak to us about how we can help you and your business provide women and anyone else in your teams who may need support that goes beyond the standard one-size-fits-all approach to most pensions. Send us an email at pensions@tillitinvest.com to start a conversation.
(2) https://www.gov.uk/government/statistics/gender-pensions-gap-in-private-pensions/the-gender-pensions-gap-in-private-pensions#what-you-need-to-know, section 2.3 ‘What we do not report on’
(4) https://researchbriefings.files.parliament.uk/documents/CBP-9517/CBP-9517.pdf, section 3.4, par. ‘Earnings threshold’, page 20
(5) https://www.nowpensions.com/app/uploads/2024/02/gender-pensions-gap-report-24.pdf, section 04, par. ‘The impacts of divorce on retirement’, page 24
(6) https://www.pensionspolicyinstitute.org.uk/media/1qpb5bsl/20190711-understanding-the-gender-pensions-gap.pdf, chapter 1, ‘Understanding the scale of the gender pension gap’, page 8
(7) UK Adult Financial Wellbeing Survey 2021 Gender Report, section 2.2 ‘Gender and financial wellbeing ‘, page 5