Report says women need to work until 83 to close gender pension gap

Women are reaching retirement age with £136,800 less in their pension than the average man, according to a report by Now Pensions¹. The pension provider said women would need to work an additional 18 years in full-time employment to close the gender pension gap, which would mean working until the age of 83 rather than 65¹.

The report, produced with the Pension Policy Institute (PPI), found women have an average of £69,000 in their pension, while men's average retirement savings stand at £205,800¹. Although the average pension pot has almost doubled to £111,600, the report suggested women's savings have hardly increased at all¹. Now Pensions estimates the gender pension gap is twice the size of the gender pay gap, with women's retirement wealth averaging only one-third of men's in the UK¹. Women's average life expectancy is 3.7 years longer than men's, meaning their pension savings need to sustain them for longer¹.

The report identifies several factors behind the gap. Now Pensions says 3m women are locked out of a workplace pension because they do not meet the criteria for auto-enrolment, which requires being aged 22 or over, below state pension age, working in the UK and earning more than £10,000 a year¹. The minimum total contribution under auto-enrolment rules is 8%, with the employee paying at least 5% and the employer at least 3%¹. According to the report, 27% of women work mostly full-time throughout their careers, compared to 45% of men, and women typically spend 10 years away from the workforce to start families and care for children and other relatives¹.

On divorce, the report found less than two in 10 divorcees have a pension sharing order, meaning pension wealth is unequally distributed between partners. It found divorced women reach retirement age with just 12% of the pension wealth of men¹.

Now Pensions has suggested removing the £10,000 auto-enrolment trigger, as well as the lower earnings limit on qualifying earnings, which currently means pension contributions are based only on earnings above £6,240¹. The government has pledged to remove the lower earnings limit by the "mid 2020s" and confirmed the auto-enrolment trigger would remain at £10,000 for 2022-23¹.

The same spokesperson said: "Our plans to remove the Lower Earnings Limit for contributions and to reduce the eligible age of being automatically enrolled to 18 in the mid-2020s will enable even more women to save more and start saving earlier"¹.

Separate research from the Pensions Policy Institute found that a woman earning an average income in a full-time role who starts saving for her pension at the age of 25 can take a 10-year career break to care for her family and still enjoy the same pension income as her male counterpart by saving an additional £20 per week throughout her working life¹.

Why it matters for households

The figures describe the position women reach retirement age with, not a shortfall that appears only at the end of a career. The gap builds from lower lifetime earnings, time out of paid work and ineligibility for workplace pension saving¹. A woman who does not meet the auto-enrolment criteria, for example because she works part-time or holds several lower-paid jobs, is not automatically enrolled into a workplace scheme, and the £10,000 trigger remains in place for 2022-23¹. Contributions are calculated only on earnings above the £6,240 lower earnings limit, which the government has said it intends to remove by the mid 2020s¹.

Time out of work also affects the State Pension record, because National Insurance contributions stop while someone is not earning. Claiming child benefit brings National Insurance credits automatically, which count towards the National Insurance record¹. For anyone assessing whether their retirement savings are on track, the site's guide to how much you need to retire sets out the questions involved, and Pension Wise offers free guidance on pension options.

What happens next

The government has pledged to remove the lower earnings limit by the "mid 2020s" and to reduce the age at which people become eligible for automatic enrolment to 18 in the same period¹. The auto-enrolment trigger remains at £10,000 for 2022-23¹. No date has been reported for either change beyond the mid-2020s commitment.