The gender pay gap receives regular attention. The gender pension gap — the difference in retirement income — is considerably larger in most countries with published figures, and receives far less.
Understanding why explains something important about how small differences accumulate.
Why it's bigger
Pension outcomes are the product of a whole working life rather than a snapshot, and several factors compound.
Lower contributions from lower pay. Contributions are typically a percentage of earnings, so any pay difference translates directly into a contribution difference.
Career interruptions. Time out for caregiving means no contributions during that period, and crucially, no investment growth on contributions that were never made.
The compounding effect is the key point. A contribution missed at thirty has decades to grow; missing it costs far more than the amount itself.
Part-time work. More common among women, particularly during caregiving years. Lower earnings mean lower contributions, and in some systems part-time workers below an earnings threshold are excluded from automatic enrolment entirely.
That threshold effect is significant and underappreciated. Someone working several small jobs, each below the threshold, may be enrolled in none despite total earnings that would qualify.
Occupational segregation. Sectors with higher female employment frequently have less generous pension provision.
Longevity. Women live longer on average, meaning the same pot must fund more years. Where annuities are priced on unisex rates this is partly mitigated; where drawdown is used, the pot simply has to last longer.
The compounding arithmetic
Worth spelling out because the intuition understates it.
A contribution gap of a few years in early career, at a modest amount, becomes a very large difference by retirement, because those contributions would have had the longest time to grow.
Which means the years when people are least able to contribute — early career, low earnings, young children — are precisely the years when contributions are worth most.
That's an unfortunate structural feature of how pensions work and it explains why the gap that opens in the thirties never closes.
The divorce dimension
An area where a great deal of value is lost through inattention.
Pensions are frequently among the largest assets in a marriage, sometimes exceeding the value of a home. They are also routinely overlooked in divorce settlements.
Research examining divorce settlements has found that a substantial proportion make no provision for pension sharing, with many people apparently unaware that pensions can be divided at all.
The common outcome is one party retaining the home and the other retaining the pension, which frequently favours the party with the pension over a lifetime.
Mechanisms for sharing exist in most jurisdictions and require an order. Getting a proper valuation and specific advice is essential, and the cost of that advice is trivial relative to the sums involved.
What can be done
Contribute during career breaks where possible. Some systems permit continued contributions or credits during periods of caregiving. Checking eligibility for credits towards state provision is worth doing, since these are frequently automatic but not always.
Don't opt out to save money. Opting out of a workplace scheme to increase take-home pay forfeits employer contributions, which is giving up money. During tight periods this is tempting and it's among the more expensive decisions available.
Increase contributions when income rises. Directing part of any pay increase to contributions before adjusting spending is the mechanism that works, because it never becomes money you notice losing.
Track old pensions. Multiple jobs mean multiple small pots, frequently forgotten. Locating them, and considering whether consolidation makes sense, recovers real money. Consolidation isn't always advantageous — some older schemes have valuable guarantees — so advice matters.
Discuss it as a couple. Where one partner reduces work to provide care, the household benefits and the pension cost falls on one person. Arrangements to compensate — contributions into the lower earner's pension, or explicit recognition in financial planning — are entirely possible and rarely discussed.
Check the beneficiary nomination. Pension death benefits frequently pass according to a nomination form rather than a will, and forms completed years ago at a previous employer may name someone unintended.
The policy dimension
Individual action has limits and several structural fixes have been proposed and in some places implemented.
Removing or lowering earnings thresholds for automatic enrolment, which would include more part-time workers.
Aggregating earnings across multiple jobs for enrolment purposes.
Carer credits towards state pension entitlement, which exist in some systems and vary in generosity.
And automatic pension sharing on divorce, rather than requiring parties to raise it.
None of these is complicated. The reason the gap persists is largely that it materialises decades after the decisions that produce it, at which point it's too late for anybody affected.
General information only and not financial advice. Pension decisions should be discussed with a qualified adviser familiar with your circumstances and jurisdiction.