28th May 2015
Rising incomes for women mean that over the course of the past year they have shaved on average nine months off the age they will be when they reach £1 million in lifetime earnings.
Prudential analysed the latest ONS Annual Survey of Hours and Earnings, and found that a woman earning the average wage for her age over the course of her career will need to work until she is 69 years and seven months old to earn a total of £1 million.
However, the figure is moving in the right direction, claimed the insurer as it said in the last year the average woman needed to work until they were 70 years and five months old, and in 2012 a woman would have had to work until she was nearly 72 years and six months old to bank her first million.
The statistics also highlighted that a man earning the average income for his age throughout his working life will hit the million pound milestone at just over 50 years and eight months old. While women appear to be seeing the benefits of rising incomes in this year’s results, men are banking their first million only a week earlier than they did in last year’s analysis.
Prudential urged that despite the large gap of almost 19 years between the amount of time it takes women and men to reach £1 million in career earnings, the fact it is reducing could explain why confidence about retirement incomes is returning among women about to give up work. The firm’s ‘Class of 2015’ research has recently revealed that the expected annual retirement income of £14,300 for women retiring this year is the highest in the eight-year history of the study.
Stan Russell, a retirement expert at Prudential, said: “Earning £1 million in a lifetime may seem improbable to most people when they start out on the career ladder, but with steadily increasing earnings and longer working lives it is a milestone that is becoming more achievable.
“However, even in the early years of work the decisions made about saving and spending can have a big effect on finances later in life. The message is simple, for the best possible retirement income it’s important to save as much as you can afford from as early as possible in your career.”
The firm’s statistics also showed that the average worker, covering both men and women, will be nearly 56 and a half years old by the time they will have banked their first million and they will pay more than £212,300 in tax and national insurance; women will pay £51,400 less than men, as a result of the earnings gap between the genders.
Russell added: “When viewed in the context of a lifetime’s total earnings, the amount of tax we’ll pay on our first million is a frightening amount. But by making a five per cent annual contribution into a pension fund throughout their career, the average worker could reduce their tax bill by £10,000. And of course, most people paying into a workplace pension will have the added benefit of employer contributions going into their retirement fund.”