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The pensions gender gap

The pensions gender gap

Category: Pensions

Updated: 06/03/2015
First Published: 06/03/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

How much do you plan to retire on? And, tellingly, how does it compare to the plans of your partner? Research from Prudential has highlighted the stark gender gap in retirement expectations, with women planning to retire on £4,800 – or 25% – less than men.

Lower expectations…

The findings, part of the insurer's Class of 2015 research, identified a worrying disparity in incomes, with women planning to retire this year having an expected retirement income of £14,300. This contrasts with men's expectation of £19,100, resulting in the gender gap of almost £5,000. It means that women are preparing themselves to live on incomes that are far less than those of their male counterparts, which could have worrying implications for their standard of living in retirement.

… but the gap is shrinking

However, on a positive note, the gender gap is shrinking, and is now at its narrowest since Prudential first began recording this measure in 2009. In fact, this year's female retirees have the highest average expected retirement income ever recorded, and expect to be almost 17% better off than those who planned to retire last year. In contrast, men's retirement income expectations have increased by just 1% over the same period.

The welcome boost in expectations reflects women's increasing optimism about retirement as a whole, with 44% now believing that their pension will provide a comfortable retirement, compared with just 29% in 2014. Furthermore, 50% of women feel financially well-prepared for retirement, a noticeable increase from just 41% in 2014.

The picture is equally as optimistic when looking at the overall figure, with the average expected annual retirement income for all retirees in 2015 reaching a six-year high of £17,000, including income from private, company and state pensions. This is £1,200 higher than the average income retirees expected in 2014.

More improvements on the horizon?

In even better news, there are tentative signs that further improvement could be on the cards, with official figures from the Office for National Statistics showing that the number of people enrolled in a workplace pension has increased considerably since automatic enrolment was introduced in 2012.

The figures show that 47% of employees belonged to a workplace pension scheme in 2012, but 18 months after the introduction of automatic enrolment, this figure rose to 59%. The improvement is especially encouraging among younger savers, with the number of 22-29 year-olds with a pension having increased from 37% to 53% since 2013 alone, the largest increase of all age bands. This means more people are saving towards a pension – and they're potentially saving for longer – which could result in higher incomes during retirement.

The importance of advice

So, what are your retirement expectations? No matter what they may be, one thing remains certain – it's vital to get suitable advice. This is particularly important with the pension freedoms set to be introduced, but worryingly, 33% of those surveyed by LV= don't understand the changes, and 12% are completely unaware of any changes being made at all. Despite this, three in four of those aged 50+ aren't planning to seek financial advice about retirement funding – but don't be one of them!

This combined apathy and lack of awareness could mean many fail to make the most of their pension savings, and that could have a serious impact on the level of income they receive throughout retirement. Seeking advice could make all the difference, be it through Pension Wise or an independent financial adviser, and you could even consider your options using our no obligation annuity planner. Make the right decision, and your retirement income could ensure you have a comfortable retirement, whatever your gender.

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