Retirement income gap widens between men and women – according to new Prudential data.
The gender gap inincomes continues to grow. The latest data from the yearly Prudential survey shows that the gap between women’s and men’s annual average expected retirement incomes has grown this year (2017) by £1,000.
Women retiring this year are expected to be £6400 a year worse off, on average, than their male counterparts, and £200 a year worse off than women in their position who retired last year (2016).
Prudential Annual Study
Prudential conducts the same study every year. The findings are based on an online survey of 10,605 non-retired UK adults aged 45 or older, 1,000 of which said that they plan to retire in 2017.
Prudential has tracked the retirement income gender gap for 10 years. This years figures show that men retiring this year will be 45% better-off than women. The gender gap was at its widest in 2008 when the average expected retirement income for men was 84% higher than that expected by women.
Women retiring in 2017 expect an average annual retirement income of £14,300, which is the second highest on record, although slightly down on last year’s figure of £14,500.
Meanwhile, while women’s incomes stagnate, men’s expected retirement incomes are showing a fifth consecutive year of growth. Men retiring in 2017 expect an annual retirement income of £20,700. That’s £900 a year more than last year, which is helping drive the gender gap to its highest level for three years.
Financial Mood Still High
Despite this gap, female retirees in this year’s survey showed slightly more confident about their finances. 50% of respondents saying they feel financially well-prepared for retirement, as compared to 48% of respondents in 2016.
Causes of Gender Retirement Income Gap
The study from Prudential says that the gender gap appears to reflect the fact that many women had taken career breaks and changed working patterns after having children. Which affectedcontributions.
Kirsty Anderson, a retirement income expert at Prudential, is quoted in The Independent, saying:
“It is encouraging that many women planning to retire this year feel financially well-prepared for their years in retirement. In fact, women’s expected retirement incomes this year are the second highest on record.
“However, the gender gap in retirement incomes continues to grow, probably reflecting the fact that many women will enter retirement having taken career breaks and changed their working patterns to look after dependents. Unfortunately, as a result, many women will end up with smaller personal pension pots and some are also likely to receive a reduced State.
“For anyone who takes a career break, maintaining pension contributions and, where possible, making voluntary National Insurance contributions after returning to work, should help to minimise the impact on their retirement income. The best way to secure a good quality of life in retirement is to save as much as possible from as early as possible in your working life. Consulting a professional financial adviser to ensure that retirement financial plans are on track is a sensible route for many.
“However, with a greater number of women staying in the workforce for longer these days, and employers increasingly offering more flexible working patterns, the outlook looks more positive for women’s retirement incomes in the future.”
The Department of Work andresponded to this research with the promise of greater equality in the future, but with the acknowledgement that more needs to be done to minimise the current gap. A DWP spokesperson is quoted as saying:
“Thanks to ourreforms we expect 3.6 million women to be newly saving or saving more by next year compared to 2012 and the new State Pension also means that, by 2030, 3 million women will on average be better off by £550 a year.
“But there is more to do to ensure that women have the opportunity to build up the pensions savings they will need, which is why we will be increasing minimum contributions for workplace pensions over the coming years.”
Scottish Widows Report Warns Younger Savers
At the same time as the Prudential report, a separate study from Scottish Widows has warned that 70% of 22 to 29 year olds are not putting away enough money to achieve their desired retirement income.
The report indicates that 4 out of 5 young workers are contributing to their pensions pots, with participation having been boosted by auto enrolment in workplace schemes. But the average contribution, including money put in by employers, is just £184 a month. This is only enough to deliver an annual retirement income, including state pension, of £15,200 – some way short of a desired income of £23,000.
Catherine Stewart, retirement expert at Scottish Widows, said:
“Auto-enrolment may well be lulling people into a false sense of security that they are putting away enough for a comfortable retirement.
“For many, that is simply not the case, particularly given retirement is looking more expensive than ever.”
The advice, on the back of these studies, is that it is never too early (or to late) to consider the future, and to make sure that your retirement income matches your requirements.
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