Why men end up with four times more in their pension pots by the age of 60

Men end up with almost four times as much in their pension pots by the age of 60, according to official figures. 

But the gulf between men and women’s pensions boils down to ‘entrenched systemic barriers’ rather than a lack of financial confidence, a new report claims. 

Men hold a median of £75,000 in defined contribution pension pots just ahead of reaching 60, compared to £19,000 by women, figures from the Department for Work and Pensions show. 

Its data highlighted how the typical woman aged 55 to 59 has a staggering 75 per cent less in invested pension pots than the average man of the same age.

The gap narrows when defined benefit pensions – commonly known as final salary or career average schemes – are included, but men are still way ahead.

Men’s median combined defined contribution and defined benefit pension wealth at 55 to 59 is £323,000, more than double the £154,000 attributed to the typical woman.

New analysis this week from the University of Edinburgh supported by Evelyn Partners looks at why this happens and claims a debate often centred around a ‘lack of financial confidence’ among women saving for retirement is misguided. 

It claimed the financial sector should instead focus on the ‘hidden systemic, social and situational factors’ preventing many women from planning and saving for retirement. 

Problems flagged included ‘time scarcity and high mental load’ among women. 

Among the 15million people not saving enough for retirement in Britain, women are disproportionately affected, the DWP added. 

The DWP figures the report was based on look at the Gender Pensions Gap from the perspective of how much less women have than men. 

They show that between 25 and 29 the gap is smallest, with women having 22 per cent less than men. By 20 years later, that has expanded to women aged 45 to 49 typically having 52 per cent less than men.

The headline DWP figures look at a combination of defined contribution and defined benefit pensions but then drill down into each type of scheme. 

Defined benefit (DB) pensions involve your employer guaranteeing an inflation-poofed retirement income based on your earnings, either your final salary when you retire or more commonly now a career average. In most cases, surviving spouses will then also get a lower payout until their death.

In contrast, defined contribution (DC) pensions involve an employee and employer paying into a pot, which is invested to build a fund for retirement. The worker must then use this pot to generate their own income to retire on.

Savers can also build retirement pots outside of work by contributing to a self-invested personal pensionk, known as a Sipp.

Defined benefit pensions are normally now only available to those working in the public sector, while the private sector is dominated by defined contribution schemes, as almost all companies have closed their DB schemes.

The DWP report highlighted this and the growing importance of DC schemes. The largest group among 55 to 59-year-olds in 2020 to 2022 were those who only had DC pension wealth, made up of 703,000 men and 607,000 women. 

This was followed by those who have only DB pension wealth, at 462,000 men and 603,000 women. The smallest group had both DB and DC pension wealth, at 473,000 men and 427,000 women.

Among that age group, the gender pension gap was largest at 75 per cent for those holding only DC pension wealth.

In contrast, those whose pensions were made up solely of gold-plated defined benefit wealth had the smallest gender pension gap at 39 per cent. The combined DC and DB gap figure was 52 per cent.

What’s really behind the gender pensions gap?

The gulf has emerged despite the fact women typically contribute a similar proportion of their earnings to pension pots as men, the University of Edinburgh and Evelyn Partners report said. 

Its author, Emily Shipp, a psychologist and associate of the Edinburgh Futures Institute, said: ‘Mental load and time scarcity operate together. Women are more likely to carry the ongoing cognitive labour of anticipating and coordinating care, while also spending significantly more time on unpaid work. 

‘These pressures reduce both the mental bandwidth and the available time needed for sustained engagement with long-term financial planning.’ 

A slew of factors, ranging from lower pay, employment gaps and part-time work to taking on unpaid care for relatives and ‘gender stereotypes’, all play a role in the chasm between men and women’s private pension pots as they near retirement, according to the analysis. 

The report noted that women in Britain typically spend over three-and-a-half hours a day doing unpaid work. 

It said that ‘where women appear disengaged with long-term financial planning, this instead may be the predictable consequence of over-loaded present contexts.’ 

Shipp added: ‘Historically, financial advice and pensions policy have centred on typically male, linear career trajectories and financial goals, rather than the multi-phase, care-interrupted lives many women navigate.

‘Redesigning pensions policy and financial environments to better serve more varied priorities and life courses would better serve all genders as we move towards longer, multi-phase lives.’

The report said a ‘pensions timebomb’ was on the cards if the financial sector continued its current approach, bearing in mind it found that 60 per cent of women had no financial plan for retirement in place. 

Tobi Schneider, fintech sector lead at Edinburgh Innovations, which was involved in the report, said: ‘With an ageing population, without action, we are sleepwalking into financial disaster for a large proportion of people.’ 

Meanwhile, Emma Sterland, chief financial planning officer at Evelyn Partners, said the report shone a light on the ‘complex barriers that women face as they build their financial security over a lifetime.’ 

Another factor flagged in the report affecting both men and women, is that the move away from final salary pension schemes has shifted the risks involved from employers to workers. 

People are also living longer and often have more varied working lives, often involving career breaks, caring duties, retraining and a phased retirement.  

The report says: ‘It’s no longer enough to “set and forget” – active engagement and deliberate financial decision-making is needed. Firms must shift to contextually informed and psychologically attuned approaches.’ 

The report said initiatives such as pension credits for carers and pension products aimed at part-time work could help narrow the private pension pot gap. 

Lisa Picardo, chief business officer UK at PensionBee, told This is Money: ‘To help narrow the gap, women can take proactive steps where possible, such as increasing contributions after pay rises, making full use of employer contributions and salary sacrifice, making contributions out of household earnings when facing gaps in work due to caring responsibilities, and actively boosting pension saving during higher-earning periods. 

‘However, lasting progress will require coordinated action from employers, policymakers and the pensions industry to better support women’s retirement outcomes and prevent today’s contribution gaps becoming tomorrow’s retirement shortfalls.’

How big is the state pension gender gap? 

While a huge divide remains in private pension wealth, the state pension gender gap has shrunk to 1 per cent. This comes less than a decade after a major overhaul aimed at gradually equalising payments.

Women received £208.15 per week on average on reaching 66 and men got £209.95 in the year to November 2024, most recent Government figures show.

Although couples can get by on two full state pensions, financial experts warn individuals face a struggle on only one and recommend building a private fund too to achieve a decent standard of living. 

The state pension is set to increase by 4.8 per cent from April 2026 under what is known as the ‘triple lock’ guarantee. 

The exact sum those eligible will receive will depend on which version of the state pension they get, namely the old or new one. 

How much do you need for a comfortable retirement? 

A single person needs an income of £31,700 a year for a decent retirement, according to a widely used pension industry benchmark from trade group Pensions UK.

This ‘moderate’ lifestyle covers the essentials plus some splashing out on food and entertainment, trips abroad and running a car.

Couples need a joint income of £43,900 to meet this ‘moderate’ lifestyle, according to the annual Retirement Living Standards, and should bear in mind they will be able to afford retirement more easily with two state pensions and greater combined purchasing power.

The very minimum a single person needs to get by is £13,400 a year and £21,600 for a couple, while they need an income of £43,900 and £60,600, respectively, for an affluent lifestyle.

But these headline targets do not include some important items, which should be factored in, such as income tax, housing costs if you are still paying a mortgage or rent and care costs in later life.