When life expectancy is taken into account, the basic ‘gender pensions gap’ could be as much as £108,130, according to new analysis from the Cebr commissioned by equity release lender more2life.
This rises to £186,120 for women who are married or in a relationship with men anticipating that they will receive £8,460 more annually than their partners in retirement.
This is based on men anticipating that they will have an annual retirement income of £19,748 and women suggesting their income will be £14,833 in later life
This gender income gap is also clear among younger couples in retirement. On average, men aged 54-64 expect to receive (or currently receive) a gross income of £5,964 higher than their female partner when they stop working. Single men also expect higher retirement incomes with those over the age of 55 receiving around £3,750 more a year than single women of the same age.
More2life said that given that women typically outlive men, this ‘gap’ can have serious knock on effects as they struggle to fund a longer retirement while on a much lower income.
Dave Harris,CEO at more2life, said: “Today’s findings put a price tag on gender and suggest that while women may live longer, their financial circumstances often mean that this needs to be done on a more frugal basis than their male counterparts.
“This stark difference highlights not only the need to address the root causes of financial gender inequality but the need to better support women both in the lead up to and during later life. Part of that is encouraging them to think carefully about how they will fund their retirement using all of their available assets including their housing wealth.”
The majority of men (76%) and women (73%) over the age of 54 rely on their state pension, but men are more likely to depend on private sources of income. Nearly half (47%) of men say their income comes from a final salary or defined benefit workplace pension, compared to just over one in three (37%) women. Furthermore, over a quarter of men (28%) use pension pot drawdowns to fund their retirement, compared to 19% of women.
Men are also more likely than women to have sole ownership of the majority of assets that make up their wealth in retirement. 42% of males aged 54 and over who are in a relationship said that their wealth exceeds that of their partner, compared to just 13% of women, further highlighting the wealth gap between men and women in retirement.
Moreover, half of the men surveyed say they have independent pension wealth, compared to just 39% of women. Physical items of high value, such as vehicles, are also more popular among men aged 54 and over. More women (31%) say that they do not own this type of wealth neither jointly nor independently, compared to 20% of men.
Women over the age of 54 are more likely to have cash savings and property wealth independent of their spouse or partner. Over two in five (43%) women hold cash savings independently compared to 38% of men, while 26% of women say they are the sole owners of property wealth compared to 19% of men. However, 29% of women say they do not own property wealth at all, compared to just a quarter of men (25%).
Harris added: “At a time when there has been significant disruption to many people’s retirement savings, we need collaboration from industry and Government to encourage people to engage with long-term financial planning. While our findings show that men and women are broadly consistent when it comes to state pension engagement, there is a clear disparity between the genders when it comes to utilising alternative retirement income sources.
“Nowadays, people approaching later life often need to fund a longer and more active retirement than their parents, but with smaller pensions. As such, it’s crucial for current and future retirees to consider how assets such as property could help them form a more holistic financial plan for their later years. Equity release, for example, has proven to be a popular solution among older homeowners looking to make use of their property wealth to fund their retirement, and could enable more women to live with financial security and stability in later life.”
Diane Watson, founder of She Can Prosper, added: “While the gender income gap is a well-known issue, the gender pension gap is often overlooked, and today’s findings highlight that there remains a clear disparity between men and women when it comes their income in later life. more2life’s research reveals an extremely worrying reality that women are at risk of going into retirement less financially prepared than their male counterparts. What’s more, the ongoing coronavirus crisis is set to exacerbate this problem for many more women over the years to come.
“There are great strides to be made in closing the financial gap between men and women in later life. It is crucial that the financial services industry encourages and empowers women to become more involved in financial planning earlier on in life, so that they can have more independence and security in retirement.”