The gender gap in pensions is narrowing – but only because men’s incomes are falling, not because women’s pay is rising, new research shows.
Women retiring this year will typically receive an annual retirement income of £12,250, compared with an expected income of £18,000 for men, according to data from the Prudential.
Low interest rates and quantitative easing, policies backed by the Bank of England, the UK's central bank, have resulted in declining annuity rates which has led more than a million people to buy an annuity that will pay a lower than average rate for the rest of their lives.
Annuity rates are linked to gilts, the yields on government bonds, which have been lowered by the QE policy.
But the average shortfall of around £5,750 is lower than previous years – last year, the gender gap amounted to £6,500 while in 2010 it was £7,400, the study reveals.
The report also highlights that the average amount men and women expect to retire on in 2012 fell to a five year low of £15,500 including private, company and state pension, compared with £16,600 in 2011.
The retirement gender gap is widest in the South East, where women retiring this year expect to have £7,878 less income a year on average than men at £12,259 compared with £20,137. It is narrowest in the North West, with women having an income of around £13,087 a year, compared with £15,632 for men, a gap of just £2,545.
Vince Smith-Hughes, the Prudential’s retirement income expert, said: “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.”
The study also found that 49 per cent of women believe they will not have enough income for a comfortable retirement, compared with 40 per cent of men.
Mr Smith Hughes added: “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.”
The report illustrates that in July 2008, a 65-year-old-man could have spent £100,000 to buy a level-income of £7,855, but now that amount could only buy an income of £5,923, a drop of more than 25 per cent.
The retirement gender gap is widest in the South East, where women retiring this year expect to have £7,878 less income a year on average than men, but is narrowest in the North West, where the difference between the two is £2,545.
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