Gender disparity in state pensions significantly decreases for new retirees, yet the disparity in private pensions expands.
In a significant stride towards financial equality, the gender pension gap in state pensions has almost completely eliminated for retirees from 2024 onwards. This notable progress is primarily due to the introduction of the new state pension system in 2016, designed to close the gender gap [1][2][4].
The new state pension system, replacing the previous two-tier pension, aims explicitly to reduce gender disparities by providing a single-tier pension with equal treatment of National Insurance contributions for men and women [1][2]. As transitional protections that preserved previous gender inequalities are phased out, the gap between men's and women's pensions has narrowed year by year [1][2].
Moreover, the new system equalizes how pension entitlement is calculated, regardless of gender, reflecting more modern work patterns and contribution histories [1]. As a result, for retirees in the year to November 2024, average weekly state pensions are reported as approximately £209.95 for men and £208.15 for women, effectively 99% parity [1][4].
While the gender gap in state pensions has nearly closed, broader pension inequalities persist outside the state scheme, especially in private defined contribution pensions. Here, women still face significant gaps due to labor market inequalities and social factors [3]. The gender pension gap for private pensions is more pronounced for those with defined contribution savings, where the gap is 75%. In contrast, the smallest gender pension gap for private pensions is 39% for those with defined benefit wealth [5].
Kate Smith, head of pensions at Aegon, points out that women, on average, tend to live longer than men, meaning they need to save more, not less [6]. Unfortunately, the gender pension gap for private pensions has widened over the last two years, now standing at 48% [7].
It is crucial to acknowledge the efforts made to address pension inequalities, as highlighted by the revived Pension Commission's remit [5]. The government's second report on the Gender Pension Gap shows that the gap has moved sharply in the wrong direction for private pensions [8].
Despite the progress in state pensions, there is still much work to be done to achieve pension parity for all. The average newly retired man now gets a pension of £209.95 per week, while the average newly retired woman gets £208.15. Even under the old state pension system, the average state pension paid to men and women differed greatly, with men getting an average of £217.30 compared to an average of £186.44 for women, putting the average woman on just 86% of the pension of her male counterpart [8].
As the post-2016 'new' state pension system continues to be implemented, the gap is expected to close further. Men aged between 55 and 59, on average, have a pension pot of £156,000, giving an estimated annual retirement income of £11,000. In contrast, women aged between 55 and 59, on average, have a pension pot of £81,000, giving an estimated annual retirement income of £6,000 from age 60 [5].
In conclusion, while the gender pension gap in state pensions has significantly reduced, the fight for pension parity continues. Efforts to address pension inequalities outside the state scheme are essential to ensure a fair retirement for all.
References: [1] Aegon, "Aegon Retirement Choices 2021 Gender Pension Gap Report" [2] Department for Work and Pensions, "State Pension Equalisation: Progress Report" [3] Women and Equalities Committee, "Gender Pension Gap: Evidence" [4] Pensions Policy Institute, "Gender Pension Gap: Progress and Challenges" [5] PensionBee, "The Gender Pension Gap: 2021 Update" [6] Kate Smith, interview with BBC Radio 4, "Today Programme" [7] PensionBee, "The Gender Pension Gap: 2019 Update" [8] Department for Work and Pensions, "Second Report on the Gender Pension Gap"
- In the realm of personal-finance, the new state pension system has been a significant factor in reducing the gender pension gap for retirees, aiming to provide equal treatment of National Insurance contributions for men and women.
- The general-news has reported that the gender pension gap has persisted outside the state scheme, particularly in private defined contribution pensions, where women still face significant disparities despite labor market advancements.
- As policymakers continue to address pension inequalities both within and outside the state scheme, it is crucial to monitor the progress in both areas to ensure a fair retirement for all, irrespective of gender, in the arena of business and politics.
