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Women living off 47% less money than men in retirement

Press release: 04/03/2015

  • Quarter (23%) of women approaching retirement set to rely solely on the state pension
  • 4.3 million current retirees have outstanding debts, including credit cards (2.3 million) and mortgages (1 million)
  • A third (33%) of those approaching retirement age don’t understand the pension reforms

A new report has revealed a huge gender disparity when it comes to pension savings and income, indicating that funding retirement is likely to be a significant challenge for many women.

According to the annual ‘State of Retirement’, report by retirement specialist LV=, women who have occupational or private pensions reach retirement with pots worth on average £107,000. This is almost half that of men who, on average, retire with a fund worth £201,000.

The potential difficulty facing women is highlighted by the fact that one in four (23%) women approaching retirement have only the state pension to rely on, compared to just 9% of men. As fewer women have pension savings, the income gap is even wider if we look at across the genders at all those approaching retirement. This sees the average woman’s private pension at retirement fall to just under £10,000, which is less than a tenth of the equivalent average male pension pot (£131,000).

However, that’s not to say it is all plain sailing for men. The report reveals that, regardless of gender, funding a post-work life will be difficult. The findings uncover a gap between the level of income those approaching retirement say they need and what they can expect. Indeed, although those nearing retirement say, on average, that they will need at least £14,352 a year to meet essential expenses, they can actually expect just £10,590 a year from their private and state pension combined – a shortfall of £3,744 a year[1].

For many, this problem is heightened by the burden of debt and family dependencies now following them into retirement. Currently, 4.3 million retirees have some form of debt, in the form of a mortgage (1 million) or outstanding credit card debt (2.5 million). Over a third (4.4 million) of retirees have given financial help and support to family members, mainly children, in the last 12 months. The figures also reveal that one in fifty over-50s plan to take their pension as a lump sum to pay off debts.

These financial concerns, coupled with the fact that people are spending longer in retirement, have caused many to reconsider their retirement plans. Nearly a quarter (22%) of over-50s say that they now plan to retire later than previously considered, while 1.6 million over-50s don’t think they’ll ever stop working. The findings also show that one in five (18%) over-50s who had retired have since re-entered the workplace.

It is clear that some people have returned to work because they need to. However for others, the adage that “sixty is the new forty” is alive and well, with one in four (23%) retirees re-entering the workplace because they wish to keep working. One of the main reasons for this is a desire to keep active and make use of the skills they have spent a lifetime honing, the other is the social aspect of being at work.

In little over a month, pension reforms that give retirees greater freedom as to how they take an income from their retirement savings will come in. These changes offer retirees the chance to make more of their pension pot by selecting alternatives to standard annuities and potentially combining annuities with income drawdown. However there is confusion amongst over-50s around what the new rules mean. Only a fifth (23%) claim to have a good understanding of the reforms, while a further third (33%) have little or no understanding at all. One in ten (12%) over-50s are completely unaware that any changes are due to be made, meaning that many could miss out on the chance to improve their income in retirement.

John Perks, Managing Director of LV= Retirement Solutions, said: “People are now spending longer in retirement and our report highlights the gap between the income Brits believe they need in retirement and what they can realistically expect to receive. In just a few weeks, those approaching retirement will have more choice as to how they use their pension fund and these changes could help many savers to significantly boost their income. The new government campaign on Pension Wise will go some way to informing people about the new pensions landscape and the ways they could fund their retirement, however we would always encourage people to seek advice to ensure they make the most of the savings they have spent a lifetime building.”

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Note to editors:

The State of Retirement research was carried out by Opinium Research from 27th to 30th January 2015. The total sample size was 1,518 British adults over 50 and was conducted online. Results are weighted to a nationally representative criteria.

[1] According to the research by Opinium, 879 over 50s (those not retired) people were question how much money they thought they would need in retirement per week, as a ‘bare minimum. The mean answer was £276 (equivalent to £14,352 per year).

According to CEBR research carried out for the report, the average retiree has £73,100 in private pension wealth upon retirement. An average annuity for a male or female smoker retiring with this sum would pay £4,709 a year. Add state pension (£5,881) this brings the total income to £10,590 a year or £204 a week - £72 less than the minimum standard – or £3,744 per year.