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New research reveals men have much bigger pension pots than women on average

You’ve probably read stories recently about the gap between the salaries of men and women, as well as the lack of women on the boards of major companies and institutions.

In order to tackle this, the Government is requiring businesses to publish gender pay gap details for the first time. Among the firms who have disclosed so far, over three-quarters (76%) pay men more money than women.

What you might not realise is this income disparity extends to pensions as well. According to research conducted by AJ Bell ahead of the third anniversary of the pension freedoms, the average annual withdrawal made by women using the pension freedoms is less than half those made by men – £4,100 for women compared to £8,500 for men.

The main reason for this is simple: women have, on average, significantly smaller pensions than their male counterparts. While the average personal pension pot of the people surveyed was £104,000; for men the figure is £143,000 versus just £53,000 for women.


For younger generations it is hoped a combination of rising average wages and automatic enrolment will, over time, close the gender gap in pensions.

But if you are in your 40s or 50s and worried your pension pot won’t be big enough to support you in retirement, take a breath and don’t panic.

While it’s easier to build up a decent retirement fund by making regular contributions from a younger age, pension allowances remain generous and there are bonuses on offer to help you make up for lost time.

Most people can save £40,000 a year tax-free in a pension subject to sufficient earnings. Tax-relief is granted at your ‘marginal rate’ of income tax. In simple terms this means you get a savings ‘bonus’ from the Government based on how much tax you would normally pay.

So if you’re a basic-rate (20%) taxpayer and you contribute £80 into a SIPP, your provider will automatically add an extra £20 in tax-relief.

Furthermore, higher-rate taxpayers can claim an extra £20 through their tax return, while additional-rate taxpayers can claim £25. Anyone in a workplace pension also gets a matched contribution from their employer.


One thing to be wary of is the Money Purchase Annual Allowance (MPAA). This kicks in if you flexibly access your pension – so either a flexi-access drawdown payment or an ad-hoc lump sum (known in the jargon as Uncrystallised Funds Pension Lump Sums, or UFPLS).

Once you’ve done this, your annual allowance is slashed from £40,000 to just £4,000, severely restricting your ability to make up for lost pension saving time.

Anyone with total earnings of more than £150,000 could see their annual allowance cut to as low as £10,000 – if you think this might be you it’s worth speaking to a regulated financial adviser to discuss your options.

Tom Selby, senior analyst, AJ Bell

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