Women have long faced a gender pension gap at retirement, receiving a smaller income than men in later life.
New research has found that women retiring this year will receive an average retirement income of £4,600 a year less than men. That’s a 25% reduction. Equity release specialist Key published its Retirement Ready 2021 study, looking at the finances and retirement goals of 1,000 people expecting to finish full-time work this year. They found that men expect their retirement income to £23,646 a year, on average, compared to £18,991 a year for women.
While this is a considerable income reduction for women retiring this year, the size of the gender pension gap is even more significant when viewed over a 20-year retirement. Men might expect to receive £93,000 more than women during retirement. These are big numbers and a large gap, but the gender gap has closed slightly this year compared to last. In 2020, men expected to receive 29% more retirement income than women each year.
The research found that 29% of women retiring this year expect to receive income lower than the Joseph Rowntree Foundation’s (JRF) Minimum Income Standard of £12,500 a year. Last year, 27% of retiring women expected to receive income below this threshold. By way of contrast, 17% of men expect to retire with less retirement income than the threshold in both 2021 and 2020.
There is also a great deal of uncertainty about retirement income this year, with 20% of women reporting they are unsure about their finances, compared to 9% of men. This lack of financial understanding goes some way to explain why 21% of women feel unprepared for retirement compared to 15% of men.The research suggests that the Covid-19 pandemic has also played a role in retirement uncertainty, with 14% of women saying they are “really not prepared and worried about it”, up from 10% last year.
Men retiring this year rely on company pension schemes, which make up 34% of expected retirement income in 2021, followed by 30% for the state pension. Women expect to receive 34% of their retirement income from the state pension, followed by 29% from company pension schemes.
Will Hale, CEO at Key, said:
With women typically earning less over the course of their careers, more likely to work part-time or need to juggle their career and caring responsibilities, the gender pay gap quickly becomes the gender pension’s gap at retirement. It is disheartening that in 2021, women still expect 25% less than their male counterparts and nearly a third expect their income to fall below Joseph Rowntree Foundation’s (JRF) Minimum Income Standard