Why Women’s Pensions Fall Behind, and What Actually Changes the Outcome

Sorting life admin sometimes means being stuck on the laptop on a Sunday night, sending that email that was due on Friday, juggling bills, career progression, WhatsApp groups and more. And then there’s money: the pay gap, career breaks, bias and the quiet dent that shows up later in your pension.

On average, women end up with smaller pension pots than men, and this isn’t about women being bad with money - it’s about how work and life are structured and the ways the system is set up. 

We’re finally talking about midlife, divorce and money more honestly. Pensions are the unglamorous part of that conversation that changes the ending. 

Thankfully, Smart Pension share some guidance on what tends to shift the numbers, without requiring you to become a pensions person. 

The Pension Gap Isn’t a Personal Failing 

Women’s pensions fall behind for boring, structural reasons, and they add up. Women are more likely to bear the burden of caregiving duties and the need to take time off for maternity, which means a reduction in pension contributions or a gap in contributions altogether. This can also affect your State Pension, because gaps in your NI record can reduce what you receive later - but it’s checkable. Add the pay gap, and you get smaller contributions, which means less compounding over time. 

And in divorce, pensions often get missed out when it comes to the asset calculation. This leaves you with less when it could be avoided - ask the question early. Pensions are easy to overlook because they’re not “cash on hand”. 

If any of this sounds familiar then take note, you’re not behind because you did anything wrong. You’re behind because the system rewards uninterrupted careers. But it is never too late to create a positive change for yourself. 

The Power Years: Why Midlife Changes the Maths 

If you’re in midlife, what we like to refer to as your Power Years, you likely have a: higher earning potential, clearer priorities and the ability to course-correct. The suggestions that follow provide small shifts that help you build for retirement. 

The Moves That Shift the Outcome 

Employer pension and matching: stay opted in to your workplace pension - the default investment strategy is usually a good balance of risk and reward. Most schemes offer a small menu: default, higher growth, lower risk. You’re not looking for perfect, just a deliberate choice. If your employer matches contributions, capture the full match. If you can, consider nudging your contribution up until you’re getting the maximum employer contribution. Also, speak to HR about salary sacrifice, as it can reduce National Insurance (and sometimes tax) because the contribution is made as an employer contribution. 

The power of compounding: compounding is growth on top of growth. Even a small increase now can do more heavy lifting over time, especially with employer contributions. 

Continue contributing when life changes: whether it be career changes, breaks, maternity or caring duties, it can help to maintain pension contributions, no matter how small. Check your NI record - you can usually top up recent years, but only if it increases your State Pension. Also, check who your pension is set to go to should you pass away. “Expression of wish” forms don’t update themselves, and you don’t want to discover it’s still set to someone from a previous life. 

Investment market downturns and retirement age: it’s good to remember that whilst you continue to contribute to your pensions during a downturn, you’re buying investments at a lower price - which can help if markets recover. Thinking now about your retirement age, it is worth checking on something called a glidepath - a process that gradually moves your investment strategy from growth mode to protection mode as your goal gets closer. Check your retirement age so the de-risking schedule matches your reality. 

Your annual reset: make retirement management easier by trying an annual pension reset.

Add the following to yours: 

• Check your employer's contribution rate and whether they have a matching scheme 

• Review your retirement age settings to make sure they’re aligned with your plans 

• Ensure that your nominated beneficiaries are up to date 

• Check you’re on track with your State Pension and top up if needed 

• Review your life changes and make the necessary updates so things reflect your life now 

To conclude, you don’t need to become a pensions person to benefit from this financial advantage. Rather, it just pays to create an organised system that remembers on your behalf to build compounding pension wealth into your life.

Whatever your pension health, grow your financial knowledge with expert guidance at Smart Pension’s wellbeing hub. 

*This piece is a paid partnership with Smart Pension.