A new report has shown how the gender pay gap extends into retirement, with women enjoying considerably lower incomes than men.
The research, carried out by Prudential, found that women are on average £6,500 per year worse off than men. To compound the problem the Prudential also found that women retiring in 2013 will have the lowest income since 2008.
The Prudential survey, which is produced annually, found that women have average incomes of £11,750 per year, made up from a combination of State Pension, plus private and company pensions.
On the other hand, the average male pension, made up from the same sources, was £18,250; some £6,500 higher.
To make matters worse it appears that retirement incomes for women are falling; after peaking at an average of £13,700 in 2008, they have declined every year since.
Although the £6,500 gender gap in retirement income is not the largest over recent years, it is still concerning, especially with incomes for women falling in retirement whilst those for men are rising.
Why are retirement incomes falling?
Financial experts believe there could be a number of reasons why retirement incomes for women are falling.
Firstly, any Annuity rates comparison shows just how far rates have fallen since their peak in 2008, giving less income from the same sized pension fund in 2013 compared to 2008, when female incomes peaked.
Secondly, it is possible that the tough economic times since 2008 have caused women to reduce their pension contributions, with less disposable income and more limited funds being focused on day to day essentials.
Finally, the trend of more women than men taking part time work, which generally means lower earnings, with less likelihood of access to a work place pension, will also have had an impact on female retirement incomes.
What about the future?
Whilst no one is expecting Annuity rates to rise significantly over the short or even medium term, there are some reasons to think that retirement incomes could start to show modest increases in years to come.
To begin with, the new flat rate state pension of around £144 per week, from 2016, will go some way to help alleviate the problem.
Furthermore it was announced in the recent Budget that the start date for the flat rate State Pension would be brought forward a year to 2016, allowing 400,000 more people to benefit, including around 85,000 women who would have missed out under the original proposals.
However, there are issues with the new flat rate State Pension, which will only be available to those who have made 35 years National Insurance contributions. Whilst the level is only very slightly above the maximum which can already be claimed by people in retirement, through a combination of basic State Pension and Pension Credit top ups.
There is also hope that as the pay gap between working men and women reduces, so will the income gap in retirement.
It is also hoped that auto enrolment, which over the next few years will see all employers having to offer employees a work place pension, to which both must contribute, will also increase pension provision, especially for women who have traditionally been in lower paid jobs.
Despite hope that the gap will narrow a spokesperson for Prudential said: “It’s unlikely that retirement incomes will even out for many years to come.”
Are you concerned about your retirement income?
If you are affected by the issues raised in this article, or about your future retirement income, we can help.
Our team of Independent Financial Advisers in Nottingham are experienced in developing retirement income strategies for clients the length and breadth of the UK; if you are approaching retirement and would like advice on your options call one of our IFAs today on 0115 933 8433.