Women’s pensions could run out just four years into retirement

Ahead of International Women’s Day this Sunday (8 March), interactive investor, the UK’s leading flat-fee investment platform, shines a light on the persistent gender pension gap and outlines steps that women can take to boost their pension pots.

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interactive investor calculates that older women only have enough pension wealth to last four years in retirement, compared with 14 years for men the same age.

• The calculations are based on recent DWP data, revealing that women aged 62 with DC pension wealth have just £28,500 saved in their pension on average, compared with £90,000 for men
• The findings are consistent with interactive investor’s Great British Retirement Survey, which looks at broader pension engagement across the UK and outlines how we can make a real difference to the financial resilience of UK pension savers.

Camilla Esmund, Senior Manager, interactive investor, says: “It’s extremely concerning, but sadly not surprising, to see the scale of pension divide among those nearing retirement.

“Our calculations, based on this new DWP data, are consistent with the findings from our Great British Retirement Survey; many women are facing significant financial hardship with barely enough to cover a few years’ worth of spending in retirement. Something needs to change. Though we’re looking specifically at the gender gap here, there’s a glaring problem more broadly, too. Both men and women are at risk of running out of money in retirement, so we still need meaningful reform to ensure everyone can build long-term financial resilience.

“Retiring with an inadequate pension means that thousands of women will be completely reliant on the state pension – which, already for most people won’t be enough for a comfortable retirement. Or they’ll be completely reliant on a partner’s pension, which we can also see in this DWP data. This means less financial independence, less agency, less flexibility.”

The DWP data* reveals:

• The average pension value for older men with a DC pension is 3 times that of women - £90,000, compared with £28,500 for women
• The average annual pension income for older men with a DB pension is £13,900, compared with £7,500 for women.
• 19% of women with a DC pension who have accessed their pension, withdrew their whole pension as a lump sum, compared with 12% of men.

interactive investor’s calculations are based on these figures and show that women’s pensions could run out after just 4 years in retirement, compared to 14 years for men, assuming they need an income of £20,000 year. Alongside a clear gender difference here, this also shows that both men and women are struggling to build pension wealth. This assumes they receive the full state pension, which pays around £12,000 a year, and withdraw £8,000 annually from their DC pension, rising 2% with inflation and that their pension wealth enjoys investment growth of 5% each year after fees.

Younger women also expect to have a substantial retirement wealth divide. The interactive investor Great British Retirement Survey 2025 revealed that non-retired women expect to have pension wealth of £150,000 by retirement, compared with £250,000 for men.

Esmund adds: “Because women earn less than men, closing the gap is a tough ask, which is why talking about this and making women aware of the issue is so important. Women already need to save a higher proportion of their salaries, while surviving on lower take-home pay. Plus, a lifetime of lower earnings means lower pension contributions, receiving less tax-relief and lower employer top-ups.

“This cohort of older women in the DWP data were penalised by the pension system. They worked during a time when many smaller employers didn’t provide a pension. They often put saving for retirement on the back-burner while they took career breaks or worked part time. Then they returned to work in a system that was stacked against them. Many older women didn’t benefit from auto-enrolment, which introduced workplace pensions for the majority of employees in 2012.”

How women can boost their retirement pots

Esmund adds: “Policymakers are grappling with how to tackle some of these issues, but in the meantime, it is vital that women take matters into their own hands. For individuals wanting to boost their pension, there’s some good news because topping up your pension isn’t just about saving large amounts. Even small regular savings can make a big difference over time. Paying just £50 more into your pension each month could add up to £74,000 more in your pension pot by retirement (assuming 40 years of pension saving, 5% investment growth and 2% annual increase in contributions).

“Pensions are still one of the best ways to build long-term wealth because investment growth is sheltered from capital gains and dividend tax. And pension contributions get an immediate tax boost because tax relief is added to your contribution. So, a £100 pension contribution only costs £60 after tax for a higher-rate taxpayer and £80 for a basic-rate taxpayer.”

*All data relates to cohort born in 1958 who were aged between 62 and 65 at the time of being interviewed.