Women need to mind the GBP100,000 pension gap, says new research

Gender gap

With men anticipating that they will have an annual retirement income of GBP19,748 and women suggesting their income will be GBP14,833 in later life, new analysis from the Cebr, commissioned by equity release lender more2life, suggests that when life expectancy is taken into account the basic ‘gender pensions gap’ could be as much as GBP108,130. 

This rises to GBP186,120 for women who are married or in a relationship, with men anticipating that they will receive GBP8,460 more annually than their partners in retirement.
 
This gender income gap is also clear among younger couples in retirement. On average, men aged 54-64 expect to receive (or currently receive) a gross income of GBP5,964 higher than their female partner when they stop working.   Single men also expect higher retirement incomes with those over the age of 55 receiving around GBP3,750 more a year than single women of the same age.  Given that women typically outlive men, this ‘gap’ can have serious knock on effects as they struggle to fund a longer retirement while on a much lower income.
 
Dave Harris, Chief Executive Officer at more2life, says: “Today’s findings put a price tag on gender and suggest that while women may live longer, their financial circumstances often mean that this needs to be done on a more frugal basis than their male counterparts.  This stark difference highlights not only the need to address the root causes of financial gender inequality but the need to better support women both in the lead up to and during later life.  Part of that is encouraging them to think carefully about how they will fund their retirement using all of their available assets including their housing wealth.”
 
The majority of men (76 per cent) and women (73 per cent) over the age of 54 rely on their state pension, but men are more likely to depend on private sources of income. Nearly half (47 per cent) of men say their income comes from a final salary or defined benefit workplace pension, compared to just over one in three (37 per cent) women. Furthermore, over a quarter of men (28 per cent) use pension pot drawdowns to fund their retirement, compared to 19 per cent of women.
 
Men are also more likely than women to have sole ownership of the majority of assets that make up their wealth in retirement. Indeed, 42 per cent of males aged 54 and over who are in a relationship said that their wealth exceeds that of their partner, compared to just 13 per cent of women, further highlighting the wealth gap between men and women in retirement.
 
Moreover, half of the men surveyed (50 per cent) say they have independent pension wealth, compared to just 39 per cent of women. Physical items of high value, such as vehicles, are also more popular among men aged 54 and over. More women (31 per cent) say that they do not own this type of wealth neither jointly nor independently, compared to 20 per cent of men.
 
Interestingly, though, women over the age of 54 are more likely to have cash savings and property wealth independent of their spouse or partner. Over two in five (43 per cent) women hold cash savings independently compared to 38 per cent of men, while 26 per cent of women say they are the sole owners of property wealth compared to 19 per cent of men. However, 29 per cent of women say they do not own property wealth at all, compared to just a quarter of men (25 per cent).
 
Harris says: “At a time when there has been significant disruption to many people’s retirement savings, we need collaboration from industry and Government to encourage people to engage with long-term financial planning. While our findings show that men and women are broadly consistent when it comes to state pension engagement, there is a clear disparity between the genders when it comes to utilising alternative retirement income sources.
 
“Nowadays, people approaching later life often need to fund a longer and more active retirement than their parents, but with smaller pensions. As such, it’s crucial for current and future retirees to consider how assets such as property could help them form a more holistic financial plan for their later years. Equity release, for example, has proven to be a popular solution among older homeowners looking to make use of their property wealth to fund their retirement, and could enable more women to live with financial security and stability in later life.”
 
Diane Watson, founder of She Can Prosper, adds: “While the gender income gap is a well-known issue, the gender pension gap is often overlooked, and today’s findings highlight that there remains a clear disparity between men and women when it comes their income in later life. more2life’s research reveals an extremely worrying reality that women are at risk of going into retirement less financially prepared than their male counterparts. What’s more, the ongoing coronavirus crisis is set to exacerbate this problem for many more women over the years to come.
 
“There are great strides to be made in closing the financial gap between men and women in later life. It is crucial that the financial services industry encourages and empowers women to become more involved in financial planning earlier on in life, so that they can have more independence and security in retirement.”