Retirement income gender gap is shrinking
06 March 2015
According to research from Prudential, women retiring this year expect a retirement income 25 per cent lower than men; however the retirement income gender gap is now at its narrowest since 2009.
The insurer's annual 'Class of' research, which tracks the future financial plans and aspirations of people planning to retire in the year ahead, is now into its eighth year and has highlighted 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.
However, the good news is that the gender gap is shrinking and is now at its narrowest since 2009 when Prudential first started tracking the difference between male and female retirement income expectations as part of its 'Class of' research.
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 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.
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. A consultation with a financial adviser or retirement specialist could also help people construct a sound retirement plan and secure a more comfortable retirement income."
Prudential's Class of 2015 research previously found the average expected annual retirement income for all retirees in 2015 reached a six-year high of £17,000, including income from private, company and state pensions. This is £1,200 higher than the average expected income of 2014.