Last updated at 15:07, Friday, 15 June 2012

The gender gap is narrowing when it comes to how much money we’re likely to have during retirement.

The difference between men and women is more due to male incomes falling rather than the fairer sex boosting their pension pots.

The typical sum that men and women expect to retire on in 2012, including their private, company and state pensions, has reached a five-year low of £15,500 annually, compared with £16,600 in 2011, Prudential said this week.

Women retiring this year expect to have a typical annual income of £12,250, around £5,750 less than the £18,000-a-year for a man retiring in 2012, according to the research.

The gender gap has been narrowing since 2010, when it stood at £7,400, something which the study said was mainly due to falls in male incomes.

Men retiring two years ago had an expected annual income of £19,600, while women were retiring on around £12,200 a year.

Ros Altmann, director-general of Saga, said women had consistently been the “poor relations” to men when it came to pensions, but Government reforms should go towards making the system fairer.

Dr Altmann said: “The fact is that, in terms of both state pensions and private pensions, women’s prospects are worse. This is particularly the case for older women, since our pension system has adjusted in more recent years to be fairer to women.”

When the state pension system was first designed, it was generally assumed women would be relying on their husbands’ pensions.

Women are also more likely than men to have earnings below the minimum national insurance threshold, meaning they may have missed out on the entitlement to a state pension for those years of work.

Private pension schemes were also allowed to exclude part-time workers in the past, so women again lost out far more than men.

Nearly half of women surveyed by Prudential believe they will not have enough income for a comfortable retirement, compared with 40 per cent of men.

Low interest rates and quantitative easing (QE) have particularly hit annuity rates, which analysts say has resulted in more than a million pensioners buying an annuity which will pay less for the rest of their lives.

When they retire, workers use their pension pot to buy an annuity from an insurer, a decision which sets the size of their pension for life.

Annuity rates are linked to the yields on government bonds, called gilts, which have been dramatically reduced by QE.

Analysts have found that a 65-year-old man with £100,000 could have bought a level income of £7,855 in July 2008, but someone in the same situation this year would only receive an income of £5,923, a drop of just under 25 per cent.

Vince Smith-Hughes, Prudential’s retirement income expert, said: “The pension gender gap appears to be narrowing, but there is still a long way to go.

“Not only does the gap remain stubbornly wide, but anticipated retirement incomes have this year hit a five-year low for both men and women.

“The practical steps that women can take to improve their retirement income prospects include maintaining pension contributions during career breaks and, if possible, making voluntary National Insurance contributions after returning to work.”

The retirement gender gap was found to be widest in the south east, where women retiring this year expect to have £12,259 – £7,878 less income a year on average than men, who expect £20,137.

It is narrowest in the north west, with women in the region having an income of around £13,087 a year, compared with £15,632 for men, a gap of £2,545.

First published at 14:10, Friday, 15 June 2012
Published by http://www.cumberlandnews.co.uk