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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Gender gap in pensions 'shrinking'

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.


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