Recent success in reducing defined benefit (DB) and state pension gender gaps could be undermined if inequalities between men and women in defined contribution (DC) pensions continue to rise, LCP has warned.

LCP's research showed that the gender pension gap in state pensions has almost been eliminated for the newly retired, with a freedom for information reply showing that there was a gap of just 2 per cent between the state pensions of newly retired men and women in 2022/23.

Furthermore, it showed that full equality is expected to be attained during the 2030s, thanks to the phased introduction of the new state pension which began in 2016.

The gap between men and women is also set to fall sharply amongst private sector DB pensions, although this was not because of improvements amongst women, but because men’s pensions are set to decline dramatically.

The report explained that men have in the past been the main beneficiaries of private sector DB, with the fall therefore reflecting the impact of scheme closures.

In addition to this, it pointed out that DB pensions remain open in the public sector where the majority of the workforce in the NHS, teaching and local government is female.

Despite the narrowing state and DB gender gap, LCP forecast growing inequalities between men and women in the DC space, estimating that the DC gender pensions gap will rise from the current £25 per week, to over £30 per week by the mid-2040s.

The firm's report identified six primary sources for the gender pension inequality: the gender pay gap, the 'caregiver penalty', the 'longevity penalty', relationship breakdown, differences in the impact of rules on auto-enrolment and differences in financial confidence.

However, the report suggested that improvements could be made, outline a series of calls for action directed to government, employers and the pensions industry.

In particular, LCP urged the government to continue with the annual publication of gender pension gap statistics, with more commentary on underlying causes and a commitment to tackle them.

Alongside this, it recommended that the government take further steps to reduce the inequalities which arise following the birth of a child, including effective policies on shared parenting and greater provision of support for childcare for the youngest children.

It also encouraged the government to review the position of the growing number of cohabiting couples with a particular focus on the way in which gender pension inequalities may persist after the break-up of such relationships, as well as the effectiveness of current legislation around pension sharing on divorce.

The pensions industry also has a role to play, as LCP encouraged pension schemes to do more to understand more about the gender pension gap within their schemes to see if more can be done to improve the relative position of women.

It also called on schemes and providers to equip both women and men to better understand their pensions, to be empowered to make more informed choices.

LCP suggested that individual employers could also make a difference by going beyond statutory gender pay gap reporting to understand more fully the pay gaps across a firm, and to take action to tackle the wide range of underlying causes.

Commenting on the findings, report author and LCP partner, Laura Myers, stated: “Our research suggests that there has been welcome progress in some aspects of the gender pension gap, notably the reduction in inequality in state pensions.

"But there is a real risk of a new generation of pension inequality if action is not taken.

"In a world of DC pensions in particular, pension outcomes hold up a mirror to inequalities in the workplace and the different labour market experience of men and women.

"Without concerted action by government, employers and the pensions industry to tackle these underlying causes, the gender pensions gap may be with us for decades to come."

Pensions Equity Group chair, Kim Brown, added: “Inequalities in pension outcomes need not be a permanent feature of the pensions landscape.

This research shows that progress is possibly in reducing aspects of the gender pension gap, but important differences still remain. It is vital that government, employers and the pensions industry work together to tackle the multiple causes of pensions inequality. Only in this way can we make sure that all people can look forward to retirement with confidence.”

Adding to this, Now Pensions head of campaigns, Samantha Gould, highlighted the report as "just another example of how unequal pension wealth is in the UK".

"Whilst pay gaps, savings gaps, and caring gaps may have narrowed compared to previous years, persistent inequalities still remain with detrimental consequences for women when reaching retirement age," she continued.

“Career breaks, multiple jobs, and increasing childcare costs are all facts of modern life and disproportionately impact women more than men, creating multiple stumbling blocks for continued pension saving.

"The UK’s pension system needs to reflect the changing demographics of our workforce and be fit for purpose for all pension savers.

“We have long campaigned to highlight the inequality facing UK pension savers and by working together as an industry, and with government, to highlight these issues we hope to offer meaningful solutions that will help to shape a more equal future.”

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