Women planning to retire this year expect to have the highest annual retirement income on record, but they will still be £5,400 a year worse off than men in retirement. Just two in five women think they will have a financially comfortable retirement.
Women planning to retire this year expect to have the highest retirement income on record but the gender gap has started to grow again, according to new research from Prudential.
The unique annual research, which tracks the future financial plans and aspirations of people planning to retire in the year ahead, is now in its ninth year. It shows that the women in the Class of 2016 have an average expected retirement income of £14,450 – the highest on record and up £150 on last year.
However, despite the increase in the women’s average expected retirement income, the gap between the two sexes has grown by £600 since last year, to £5,400. Women planning to retire this year expect to live on an annual income 27 per cent lower on average than the £19,850 expected by men in the Class of 2016.
The growth of the gender gap among the Class of 2016 partly reverses some of the gains made by women retiring in 2015, when there was a record fall in the size of the gender gap – of nearly £2,000. Despite this year’s rising gap, the difference between men’s and women’s expected retirement incomes is still around £4,000 less than in 2008, the year when it was at its largest at £9,500.
Although women’s expected retirement incomes are at an all-time high, those planning to retire in 2016 are no more optimistic about having a sufficient retirement income to enjoy a comfortable life than those who planned to retire last year – 40 per cent in 2016 compared with 44 per cent in 2015. In contrast, six in 10 (60 per cent) men planning to retire in 2016 feel their expected income will be enough for them to enjoy a comfortable retirement.
Kirsty Anderson, a retirement income expert at Prudential, said: “The big increases we saw in women’s expected retirement incomes, as people looked forward last year to the new pension freedoms and the changes to the State Pension, have been tempered somewhat in 2016. It is possible that many women retirees were expecting to receive the new ‘flat rate’ State Pension in full, but having received their illustrations have had to revise their retirement expectations downwards.
“It is an unfortunate fact of life that many women will reach retirement having taken breaks during their working lives that will impact the level of State Pension they will receive and the size of their pension pot. However, there are a number of steps that anyone in this situation can take prior to giving up work to help improve their retirement prospects. These include continuing to make contributions to a pension during career breaks and making voluntary National Insurance contributions after returning to work.
“We have also seen a fall in women’s confidence that they’ll be able to enjoy a comfortable retirement this year. For most people still in work, the best way to secure the highest possible quality of life in retirement is to save as much as possible into a pension as early as possible – and to take professional financial advice before making big financial decisions.”