Gender pay gap vs pension gap across Europe: Why inequality gets worse in retirement?

The gender pay gap is evident. In the EU, women earn 11.1% less than men. The gap worsens in retirement. The gender pension gap is significantly higher than the gender pay gap. On average, women pensioners in the EU receive 24.5% less than men, more than twice the pay gap.

But why is the pension gap so much larger? How does the gender pay gap compare with the gender pension gap across Europe? And in which countries is the gender pension gap the worst?

According to Eurostat, the gender pay gap ranges from -0.8% in Luxembourg to 18.8% in Estonia among 30 European countries in 2024.

Apart from these two, Belgium (0.7%), Romania (3.7%) and Poland (4%) have the lowest gap whereas Czechia (18.5%), Austria (17.6%) and Hungary (16.9%) have the highest.

The gap is also 15.6% in Germany, 13.3% in the UK, 11.8% in France, 7.3% in Spain and 5.3% in Italy.

Only in Luxembourg is the gender pay gap in favour of women at -0.8%, meaning women earn more than men.

In Nordic countries, it is largely below the EU average. “It’s not necessarily pension-system features in the Nordic countries, but also better availability of child care and different gender roles leading to more equal distribution of care work,” Professor Alexandra Niessen-Ruenzi from University of Mannheim told Euronews Business.

The average gender pension gap in the EU is more than double the gender pay gap (24.5% vs 11.1%). That means women pensioners receive €75.5 for every €100 received by men.

Two different measures, two different stories

Niessen-Ruenzi noted that the two measures capture different things. The gender pay gap is typically calculated using hourly wages.

“The gender pension gap, by contrast, reflects lifetime earnings and contribution histories. It therefore captures not only differences in hourly pay, but also differences in employment volume, career interruptions, and the number of years spent in paid work,” she told Euronews Business.

Dr Ariane Agunsoye from Goldsmiths, University of London underlined that the gender pension gap is usually much wider than the gender pay gap because pensions reflect the accumulation of inequality over an entire working life, not just current pay.

“Small differences in earnings, hours worked, career breaks, caring responsibilities, saving patterns and investment decisions build up over decades and then show up most clearly at retirement,” she said.

The gender pension gap ranges from 5.6% in Estonia to 38.2% in Malta. It is above 30% in several countries, including the UK (37%), the Netherlands (36.3%), Austria (35.6%), Luxembourg (32.7%), Belgium (31.3%) and Ireland (31.1%).

Among Europe's five largest economies, the gender pension gap exceeds the EU average of 24.5% in all cases. The UK (37%) leads by some distance, followed by Spain (29.2%) and Italy (28.6%). France (27.2%) and Germany (25.8%) are just above the EU average.

Why does the gender pension gap exist?

Professor Iris Kesternich from the University of Hamburg attributed the gender pension gap to three factors: gender wage gaps, gender gaps in hours worked all across Europe, as women work part-time much more often than men, and gender gaps in contribution years due to women leaving the labour market around the time that they have children, at least for some years.

Professor Liam Foster from the University of Sheffield also emphasised that the characteristics which cause the pay gap don't just simply transfer into retirement, but are also compounded and multiplied over time.

He explained that pensions rely on compound interest, a small gap in pension contributions in someone’s 20s or 30s expands exponentially by the time they reach their 60s.

Countries reverse the trend and where the problem is worst

The average pension gender gap is lower than the gender pay gap in only four countries.

They are Estonia (5.6% vs 18.8%), Slovakia (8.4% vs 15.7%), Czechia (9.6% vs 16.9%) and Hungary (9.6% vs 16.9%).

“Eastern European countries have a history of women usually returning to work quickly after giving birth,” Niessen-Ruenzi said.

Luxembourg records the highest difference between the gender pension gap and the gender pay gap at 33.5 percentage points (pp).

Malta (33.5pp), Belgium (30.6pp), the Netherlands (25.1pp) and the UK (23.7pp) complete the top five.

In Italy (23.3pp), Ireland (22.8pp), Spain (21.9pp), Austria (18pp), Cyprus (17.2pp), Portugal (16.2pp), France (15.4pp) and Romania (15.2pp), the difference also exceeds 15 percentage points.

Germany (10.2pp) has the lowest difference among the five largest economies, largely stemming from its higher gender pay gap (15.6%) compared to others.

Dr Gabriele Mari from Erasmus University Rotterdam pointed out that large gender gaps in lifetime earnings persist. This is largely because women still carry the load of childcare and caregiving over the life course.

“While providing more unpaid work, women are confronted with costly periods out of paid work or low-paid employment either part-time or in under-valued occupations, all key contributors to lower pensions down the line.” he told Euronews Business.