With men anticipating an annual retirement income of £20,712 and women suggesting their income will be £14,964 in later life, new analysis from Cebr and equity release lender, more2life, suggests that when life expectancy is taken into account, the gender pensions gap could be as much as £183,936.
In addition, this figure is despite the fact that women (9.4% of income) contribute more into their pension pots than men (8.3%) highlighting the true impact of the gender pay gap on retirement income.
Taking the average earnings of each gender in 2020, the research suggests that men (£3,184) are able to contribute more than women (£2,340) to their pension pot – leaving the average women needing to work an additional 14.5 years to catch up.
Dave Harris, Chief Executive Officer at more2life, comments: “Although women appear to be better at saving into their pension, they still face a retirement that is less comfortable and financially secure than their male counterparts. The stark difference in retirement incomes highlights the need to address the root causes of financial gender inequality and better support women as they make choices around how to use their assets both in the lead up to and during retirement.”
COVID-19 WIDENS THE GENDER PENSION GAP
Today’s figures showing a gender pension gap of £183,936 are also a sharp increase in the difference between men and women’s retirement income compared to more2life’s research last year, which suggested a pension gap of £157,263.
This gap is likely to have widened due to the pandemic and its impact not only on the value of pension pots but the ability of over-55s to save into them. Indeed, the research goes on to show that 30% of women say their financial situation has worsened since the start of the pandemic, hampering their ability to fund or save for later life. This is compared to a quarter of men (24%) who said the same thing.
The disparity in the proportion of women negatively impacted by the pandemic could be attributed to women being more likely to work in sectors hardest hit by Covid-19 and therefore more likely to have been made redundant or furloughed. Figures from HMRC show that there was consistently a greater number of women furloughed between July and December 20202.
Research from King’s College London and The Global Institute for Women’s Leadership also shows that 31% of furloughed women had worked zero hours in July 2020 since the initial lockdown in March, compared to 20% of their male peers, indicating that female workers were more likely to be furloughed for longer.
GENDER GAP REMAINS ACROSS ENTIRE WORKING LIVES
Looking at the data for average retirement income for men and women by the number of years worked shows that women have lower incomes in retirement across all lengths of their working life. Men who have worked full-time for 30-34 years receive the highest average annual retirement income of £22,776, while their female counterparts receive £17,004.
However, the widest discrepancy in retirement incomes between genders comes for those who have worked for more than 50 years. Of these individuals, men (£19,404) received significantly more in retirement income than women (£11,592), perhaps illustrating the fact that while women may have worked longer, these were part-time roles which fitted around family.
Dave Harris, Chief Executive Officer at more2life, continues: “Today’s figures are another alarming wake-up call about the gender disparity in retirement. It’s clear that the Covid-19 pandemic has caused significant disruption to many people’s retirement savings, but the impact has been most acutely felt among older women. As we begin to think about what a post-Covid society looks like, it’s vital that the industry and Government does more to encourage women to engage with long-term financial planning.”
“Raising awareness of alternative retirement income sources, such as property wealth, is crucial in ensuring current and future retirees can enjoy the retirements they deserve. There are a range of products on offer in the later life lending market, including equity release, which has proven to be a popular solution for older homeowners looking to unlock the wealth tied up in their homes to fund their retirement. For women, exploring such options could offer greater financial stability in later life and help to manage the impact of the retirement gender gap.”
