Women planning to retire in 2015 are preparing themselves to live on an income 25 per cent lower than their male counterparts, according to new research from Prudential.
The insurer’s annual ‘Class of’ research highlights a retirement income gender gap of £4,800 for the ‘Class of 2015’. Women planning to retire this year have, on average, an expected retirement income of £14,300, compared with £19,100 for men.
Prudential adds that the gender gap is shrinking and is now at its narrowest since 2009 when Prudential started tracking it.
It says this year’s female retirees have the highest average expected annual retirement income ever recorded by Prudential’s research, and expect to be nearly 17 per cent better off than those who planned to retire last year. In contrast men’s expected retirement income expectations have increased by just one per cent since last year.
The report states that the rise in women’s expected incomes is reflected in their increasing optimism about retirement – more than two-fifths of women (44 per cent) believe their pension will provide for a comfortable retirement, compared with just 29 per cent in 2014. Meanwhile, 50 per cent of women feel financially well-prepared for retirement compared with just 41 per cent in 2014.
Michelle Cracknell, Chief Executive of The Pensions Advisory Service, said: “It is great news that the retirement income gender gap is reducing, and we should see the gap continue to shrink in the future as changes in employment patterns work their way through the current generation of working women.
“However, there are systemic and cultural issues that impact on the ability of women to build up retirement savings, such as career breaks, part-time working and multiple low paid jobs, and they all contribute to the significant difference in the amount of pension received by men and women.
“Research such as Prudential’s is important in continuing to highlight this ongoing issue facing women pensioners. The Pensions Advisory Service can provide vital support for women planning for their retirement, helping them to make the most of the options available to them, and helping them achieve the best retirement income possible.”
Vince Smith-Hughes, a retirement income expert at Prudential, said: “The new rules on how people can take retirement income from April this year and the planned changes to the State Pension that will come into force next year have clearly contributed in helping women feel more confident about their financial prospects once they give up work.
“However, anyone who has taken significant periods of time away from full-time work can see both their pension savings and their eligibility for the full State Pension take a hit – something that the women of the ‘Class of 2015’ are likely to see as they are from the generation where women were more likely to have stayed at home with the family.
“There are a number of steps that both men and women can take to further improve their retirement income prospects, including maintaining pension contributions during career breaks and if possible, making voluntary National Insurance contributions upon returning to work.”