The gender gap for retirement income has reached its lowest since 2009 causing women to be more optimistic about their post-work finances, according to new research from Prudential.
The insurance company’s study, designed to track the future financial plans and aspirations of people planning to retire this year, found that the gender gap has reduced to £4,800, with women expecting to receive an average retirement income of £14,300, compared to £19,100 for men.
Michelle Cracknell, Chief Executive of The Pensions Advisory Service, said:
“It is great news that the retirement income gender gap is reducing, and we should see the gap continue to shrink in the future as changes in employment patterns work their way through the current generation of working women.
“However, there are systemic and cultural issues that impact on the ability of women to build up retirement savings, such as career breaks, part-time working and multiple low paid jobs, and they all contribute to the significant difference in the amount of pension received by men and women.”
This 25 percent gap means that female retirees in 2015 will be on average 17 percent better off than those who left work last year. In comparison, men’s expected retirement income has increased by just one percent in the last 12 months.
The rise in expected income for women is reflected in their increasing optimism about their financial situation come retirement. More than two fifths (44%) of female respondents believe they will be able to live comfortably on their pension, compared to 29 percent in 2014.
Half of the women surveyed also said they feel well-prepared for their retirement, a significant increase from 41 percent last year.
Vince Smith-Hughes, a retirement income expert at Prudential, said:
“The new rules on how people can take retirement income from April this year and the planned changes to the State Pension that will come into force next year have clearly contributed in helping women feel more confident about their financial prospects once they give up work.
“However, anyone who has taken significant periods of time away from full time work can see both their pension savings and their eligibility for the full State Pension take a hit – something that the women of the ‘Class of 2015’ are likely to see as they are from the generation where women were more likely to have stayed at home with the family.
“There are a number of steps that both men and women can take to further improve their retirement income prospects, including maintaining pension contributions during career breaks and if possible, making voluntary National Insurance contributions upon returning to work. A consultation with a financial adviser or retirement specialist could also help people construct a sound retirement plan and secure a more comfortable retirement income.”