Gender gap in pensions 'shrinking'

PA/AOL Money
Gender gap in pensions 'shrinking'
Gender gap in pensions 'shrinking'

Women still face significantly bigger challenges to funding their retirement than men - but the pension gender gap is shrinking, new research has found.

According to an annual state of retirement report from LV=, women who have occupational or private pensions are reaching retirement with pots worth on average £107,000. This is almost half that of men who, on average, retire with a fund worth £201,000.

One in four (23%) women approaching retirement has only the state pension to rely on, compared with less than one in 10 (9%) of men, according to the study.

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The report warned that both sexes are facing a £3,744-a-year shortfall between what they need to live on during their retirement and what they will actually have.

The average amount that people approaching retirement said they needed to meet essential expenses was £14,352 a year, but the research found that they can typically expect just £10,590 a year from their private and state pension combined.

Financial concerns, coupled with the fact that people are spending longer in retirement, have caused many people to reconsider their retirement plans, the research among more than 1,500 Britons over the age of 50 found.

More than one in five (22%) of over-50s said they now plan to retire later than previously considered, while 18% who had retired have since gone back to work.

A separate study, by Prudential, was carried out among more than 1,000 people who intend to retire this year.

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It found that women retiring in 2015 typically expect to have £4,800 a year, or 25%, less to live on than men. However, the gap between men and women has shrunk to its narrowest since Prudential's research started in 2009.

Women planning to retire this year have an average expected annual income of £14,300, which is the highest expected income for women ever recorded by the research. Men retiring this year expect to have £19,100 a year to live on.

At its widest point since Prudential's research began, the retirement income gap between men and women reached £7,400 in 2010.

Half (50%) of women surveyed by Prudential said they feel financially well-prepared for retirement, up from 41% when a similar study was carried out in 2014.

Michelle Cracknell, chief executive of the Pensions Advisory Service, which provides independent and impartial information about pensions, said it is "great news" that the retirement income gender gap is shrinking, adding: "We should continue to see the gap continue to shrink in the future as changes in employment patterns work their way through the current generation of working women."

But she said that systematic and cultural issues still impact on women's ability to build up retirement savings. As women often face juggling family responsibilities alongside work, they often take career breaks and work part-time in multiple lower-paid jobs.

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From April, people aged 55 and over with a defined contribution (DC) pension pot will be able to take it how they like and when they like, subject to their marginal rate of income tax. Previously, they would have been herded towards buying a retirement annuity.

Vince Smith-Hughes, a retirement expert at Prudential, said the pension reforms have "clearly contributed" to helping to make women feel more confident about their financial prospects once they give up work.

Mr Smith-Hughes said steps women can take to boost their retirement income prospects include maintaining pension contributions through career breaks and if possible, making voluntary National Insurance contributions upon returning to work.

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