The financial inequality facing women in the UK extends far beyond the monthly pay cheque, creating a significant and growing shortfall in retirement savings. New research reveals the gender pension gap has widened to 32%, meaning women are on track to finish work with a substantially smaller nest egg than their male counterparts.
The Stark Reality of Retirement Inequality
The Scottish Widows 2025 Women and Retirement Report delivered sobering figures. It found that women are projected to have an average annual retirement income of just £13,000, compared to men's £19,000. This £6,000 annual disparity underscores a profound long-term financial challenge. According to Rowan Harding, a financial planner at Path Financial, this gap is the result of a complex mix of societal and economic factors that accumulate over decades.
"The inequality happens over a number of years," Harding notes. "It's one of those things that you don't quite realise is happening until further down the line. People don't think about this disparity in their 20s and 30s."
Root Causes of the Widening Gap
A primary driver is the uneven distribution of caring responsibilities. Harding points out that women are more likely to take time out of paid work for maternity leave, to act as primary carers for children or elderly relatives, or to reduce their hours to part-time to manage family logistics. "They might still be 'working', but it's not paid in a formal sense," she explains. "That tends to leave those individuals... with less ability to put aside money for the longer term future."
Critically, the issue isn't confined to mothers. The persistent gender pay gap means women in the same roles as men often earn less, directly reducing the amount available for pension contributions. "That's probably one of the more subtle issues around the gender pension gaps," Harding states.
Four Key Steps to Bridge the Gap
Financial experts urge proactive measures to mitigate this growing problem. Rowan Harding provides a clear action plan for women at all career stages.
1. Start Early and Maximise Employer Contributions
For employed individuals, the first step is non-negotiable: join your workplace pension scheme immediately. "If your employer offers contributions above the legal minimum of 3%, take them up on that offer if it's affordable," Harding advises. "It's kind of free money into your pension." Self-employed women should prioritise setting up a personal pension as soon as feasibly possible.
2. Seek Professional Financial Advice
Creating a robust financial plan is crucial. A good advisor can help you understand how much you need to accumulate and set realistic goals. Harding also recommends an annual financial health check, reviewing budgets and expenditure to identify what can be sustainably allocated for the long term.
3. Strategise During Career Breaks
This step is vital for those taking time out for caring roles. Harding suggests that a working partner could contribute to the other's pension. "It's a way of recognising that childcare is work – just unpaid and without a pension," she says, advocating for couples to view finances as a family unit to prevent one party being "detrimentally impacted in the long term."
4. Use Windfalls Wisely
Inheritances, redundancy payments, or other lump sums present a valuable opportunity. While not all money should be locked away, pensions remain highly tax-efficient. Contributions receive tax relief, and the pot grows free of dividend, income, and capital gains taxes. The annual allowance for most people is £60,000 or 100% of earnings.
For those playing catch-up later in their career, Harding recommends incremental increases. "Set it up as soon as you get paid and then gradually increase that... All of a sudden it starts to become the norm." The key message is that action, however small, taken today can significantly alter the financial landscape of tomorrow.
