After four decades of work, colleagues Maria and Mark walk out of the same company on the same day, ready to begin retirement. Their careers look remarkably similar: comparable salaries, steady promotions, and contributions to the firm’s occupational pension scheme. On paper, they did everything “right.”
Yet their retirements will look very different.
Because Maria stepped away from paid work to raise children and later reduced her hours to care for an ageing parent, her pension pot is 40% smaller than Mark’s. She now faces a stark decision: accept a modest guaranteed income that may feel insufficient, or take on investment risk and hope her savings last through what is likely to be a longer life.
Maria’s story is not unusual. It is a predictable outcome of pension and labour market systems that were designed for continuous, full-time employment – excluding those with caregiving responsibilities. And it highlights a deeper truth: the gender pension gap is not only about how much women save — it is also about how fairly those savings are converted into income at retirement.
Why women face a tougher road to a secure retirement income
The gender pension gap does not disappear at retirement. In fact, it often becomes more acute during the decumulation phase — the moment when savings must be turned into income.
Women live, on average, five to six years longer than men. Their retirement savings therefore need to stretch further.
Research consistently shows that women, on average, report lower levels of financial knowledge and self-assurance than men. This can translate into greater exposure to high fees, inertia, or sub-optimal decisions at retirement — all of which can erode long-term income security.
Pension freedom: a myth for women?
Against this backdrop, the promise of “pension freedom” deserves closer scrutiny.
Leaving aside one-off cash lump sums, most people retiring with a Defined Contribution (DC) pension are presented with two main options:
- Security: purchasing an annuity that converts their savings into a guaranteed income for life;
- Flexibility: keeping their pension invested and withdrawing funds gradually through drawdown.
In theory, letting retirees choose between an annuity or drawdown sounds appealing. In practice, the reality is less fair, particularly for those who’ve had career breaks or face longer retirements — especially for women.
For someone like Maria, a smaller pension pot makes the “secure” option feel insufficient from the outset. Yet choosing flexibility means bearing investment risk and the real possibility of outliving her savings heightened by women’s longer life expectancy. What is framed as freedom can feel more like a constrained decision, where every option carries disproportionate risk.
If the pension ‘freedom’ on offer leaves women with no good options, it’s time to redesign what freedom in retirement really means.
The questions we are not asking
The current decumulation system raises important questions that have largely been ignored. Why do we accept that women must stretch smaller pension pots over longer retirements, without adjusting for their different realities? And can we design a system that automatically accounts for women's longer retirements respecting gender-neutrality rules? These are not academic debates – they go to the heart of whether our pension systems are truly fair.
The problems women like Maria face do not just appear at retirement – they build up over the years as their interrupted careers, part-time work and unpaid care responsibilities cut into their pension contributions. Without practical planning tools, many women only realise too late they will have far less in retirement.
This raises broader questions. Why is the financial cost of having children still borne primarily by women? Why do pension contributions often stop entirely when women step out of paid work to care for children or relatives? Why shouldn’t they continue during parental leave and who should bear responsibility for maintaining pension contributions?
These questions are highly relevant in an ageing society that depends on women’s participation in the labour market, yet continue to rely on them as primary caregivers throughout their working lives - from children to the elderly.
So when reducing their working hours or stepping out of paid work altogether — why are women only informed about the immediate pay cut and not the long-term pension impact in an understandable way or at all? Women and carers need clear tools to see how working less affects their future pension — otherwise, it’s not real choice. Pension projections should be as standard as payslips. And when these overviews reveal a material impact - as they so often do – we must respond with better solutions in products and collectively as a society.
Finding a way forward
Closing the gender pension gap isn’t just about saving more — it is about redesigning how retirement works and addressing the “triple care burden” of meeting the competing needs of work, family and the elderly. Hybrid payout approaches balancing security, flexibility, and fairness, offer a promising path. But we must tackle important questions: How can we pool risk to account for differences in life expectancy and savings with equitable outcomes for all? How can we achieve collective scale to secure better terms, and ensure fair distribution between men and women? And how can we provide structured guidance and default pathways to help optimal retirement choices that reflect gender realities?
Addressing these questions is not just a technical exercise — it is about creating a pension system where people like Maria and Mark, regardless of gender and career path, can retire with dignity and security.
Thanks to Carine Pilot for her contribution to this article.
Details
- Publication date
- 5 March 2026