Women could receive an average annual income of £12,250, almost a third less than men who boost an average expected income of £18,000, as annuities hit a five-year low.
Mind the ‘gender gap’
Prudential’s Class of 2012 study into the finances and anticipations of those planning to retire this year highlighted a pension income ‘gender gap’ of £5,750. The gap has gradually narrowed since 2010 when it stood at £7,400 and is currently at its lowest since the study began in 2009. The shrinking distance was attributed to the diminution of men’s incomes.
The study was based on the retirement income calculated from people’s state, company and private pension funds. The overall average annuity envisaged for both men and women retiring this year is £15,500, over a thousand pounds less than last year when it was £16,600. This is lowest average annual income measured by Prudential for five years.
The gender gap was particularly wide in certain regions with the South East showing a difference of £7,878 - just £12,259 expected for women compared to £20,137 for men. This could suggest that men’s incomes are significantly higher in areas like London. In contrast, the gender gap for the North East was just £2,545 - £13,087 for women and £15,632.
In response, just under half (49pc) of women and 40pc of men believe that they will not have sufficient income from their pension for a ‘comfortable’ retirement. Prudential’s retirement income expert, Vince Smith-Hughes commented:
“The Pension Gender Gap appears to be narrowing, but there is still a long way to go. Not only does the gap remain stubbornly wide, but anticipated retirement incomes have this year hit a five year low for both men and women.”
Pension savings were hit hard when The Bank of England pumped £126bn into the economy. Now with interest rates lowered in addition to quantitative easing, analysts believe that over a million pensioners have been left with lessened annual incomes for their entire retirement.
A man with a pension pot of £100,00 would have received an average private annuity of £7,855 in July 2008. Today, it is likely that his annual retirement income would fall short of £6,000, showing a difference of over 20pc in just 4 years.
Women are likely to be even worse off with Ros Altmann, Director General at Saga describing women as the ‘poor relation’ of the pension market. She concluded that as men typically earn more and work longer, women often find themselves penalised when it comes to retirement incomes.
Vince Smith Hughes advised:
“The practical steps that women can take to improve their retirement income prospects include maintaining pension contributions during career breaks and, if possible, making voluntary National Insurance contributions after returning to work.”
"It is imperative for anyone looking to secure a sufficient income when they retire to begin saving as much as they can, as early as they can, and to do so regularly through life. For those who are still working, it has never been a more important time to save into a pension."