What is the gender pensions gap and what can we do about it? 

The gender pensions gap is a pervasive, wide-reaching global issue which typically results in women having significantly lower financial security in old age than men. Referring to the average difference in pension wealth between men and women, the gap has been estimated at as much as 30% to 40% on average, though this varies greatly between countries.

As women tend to live longer on average than men, they will typically need to fund a longer retirement. The drop in pensions wealth can therefore result in an even greater reduction in women’s standard of living in old age and an increased risk of poverty.

Despite the considerable impact of the gender pensions gap, it has traditionally been under-researched and under-reported compared to other gender disparities, such as the gender pay gap. However, as attention turns to the economic and societal impacts of an ageing population, the pensions gap is becoming an increasing area of focus for many governments and policy-makers.

An important first step is identifying the gap, which is not necessarily straightforward. There are different ways to define and measure it, such as looking at how much pension wealth – including private and state pensions – is built up at different ages, or pension income in retirement.

Comparing pension wealth between men and women across different age categories can be particularly helpful in identifying different causes of the gap and predicting how it may change in the future, but this requires data which may be less readily available than data on retirement incomes.

Although the gender pensions gap is partly the result of the gender pay gap, there are other important contributing factors. These can include:

Gendered division of caring roles and women taking time away from work for caring responsibilities has been identified as a particularly significant factor. For example, the Pensions Policy Institute, an independent charity in the UK, estimated in a 2019 report that different working patterns reduced women’s pensions wealth in the UK by 47%.

For women who participate in defined contribution pension schemes, which provide benefits based on the amount of money paid into the scheme plus investment returns (minus costs and charges), career breaks can have a disproportionately negative impact on retirement outcomes because of the loss of compound investment returns over time.

We gathered survey responses from labour lawyers across 16 countries which highlight the different ways the gender pensions gap is being addressed. There is a lot of variation in the size of the gap and its causes, as well as variation in pension systems between countries but there are some common themes.

Unsurprisingly, the gender pay gap crops up frequently as an underlying contributor to the gender pensions gap. There are lots of examples of important work being carried out to tackle this, which should, in time, have a positive impact on the gender pensions gap.

Recent legislation in Cyprus, for example, aims to encourage flexible working arrangements and remote work, as well as extending maternity leave. Cyprus has also introduced other types of family leave to help support women’s participation in the labour market. In the Netherlands and Finland, changes to parental leave are intended to create more equality in work and childcare duties.

Reforms to state pension systems can also have a positive impact on reducing the gender pensions gap. In Chile, reforms including a universal guaranteed state pension have primarily benefited women, as they tend to have less access to private pensions.

Meanwhile in Mexico, a reduction in the number of weeks of work required to be eligible for a pension, along with changes to the constitution to provide pensions to individuals regardless of their work history, have both increased women’s access to pensions.

However, such initiatives have to start somewhere and often the first step is measuring and monitoring the gap, as we can see in Luxembourg where there is a dramatic difference between the gender pay gap (0.7% in 2020) and the gender pensions gap (44% in 2019). In the UK, the government introduced a measure of the gender pensions gap in June 2023, and confirmed it would report on this annually.

Our survey responses suggest this issue is gaining increased awareness and understanding, a trend we hope will continue. We can expect further change in this developing area in the years to come. However, it can take a long time for policy to have an impact, and progress is often incremental.

Pensions are built up over a lifetime and changes do not normally apply retrospectively. This means that the pension of someone retiring today could continue to be impacted by inequalities that existed in the 1980s or earlier.

Change is not always linear, either. For example, between 2010 to 2019, although the gender pensions gap decreased in the majority of EU member states, it increased in six member states.

It should be noted that other types of pensions gaps, such as disability and ethnicity, remain generally less well understood and less reported. We hope that increased focus on the importance of funding an adequate quality of life in retirement will shine a light on the work needed to address these other inequalities too.