The shocking gap between men and women’s pension pots laid bare

4th March 2015

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Women with private and workplace pensions are retiring with pots that are just half the value of men’s, a new retirement study has revealed.

The report by LV= found that women with occupational or private pensions reach retirement with pots worth on average £107,000. This is just over half that of men who, on average, retire with a fund worth £201,000.

A quarter of women approaching retirement are set to rely solely on the state pension compared to just 9% of men. Meanwhile, 4.3 million current retirees have outstanding debts, including credit cards and mortgages.

A third of those approaching retirement age don’t understand the pension reforms

The report has revealed a huge gender disparity when it comes to pension savings and income, indicating that funding retirement is likely to be a significant challenge for many women.

The income gap is even wider if we look at across the genders at all those approaching retirement, taking into account both those with private pension savings and those without. This sees the average woman’s private pension at retirement fall to just under £10,000, which is less than a tenth of the equivalent average male pension pot (£131,000).

The report reveals that, for both genders, funding a post-work life will be difficult. The findings uncover a gap between the level of income those approaching retirement say they need and what they can expect. Indeed, although those nearing retirement say, on average, that they will need at least £14,352 a year to meet essential expenses, they can actually expect just £10,590 a year from their private and state pension combined – a shortfall of £3,744 a year.

For many, this problem is heightened by the burden of debt and family dependencies now following them into retirement. Over a third (4.4 million) of retirees have given financial help and support to family members, mainly children, in the last 12 months. The figures also reveal that one in fifty over-50s plan to take their pension as a lump sum to pay off debts.

These financial concerns, coupled with the fact that people are spending longer in retirement, have caused many to reconsider their plans. Nearly a quarter (22%) of over-50s say that they now plan to retire later than previously considered, while 1.6 million over-50s don’t think they’ll ever stop working. The findings also show that one in five (18%) over-50s who had retired have since re-entered the workplace.

One in four retirees re-enter the workplace because they wish to keep working. One of the main reasons for this is a desire to keep active and make use of the skills they have spent a lifetime honing, the other is the social aspect of being at work.

In little over a month, pension reforms that give retirees greater freedom as to how they take an income from their retirement savings will come in. These changes offer retirees the chance to make more of their pension pot by selecting alternatives to standard annuities and potentially combining annuities with income drawdown.

However there is confusion amongst over-50s around what the new rules mean. Only a fifth (23%) claim to have a good understanding of the reforms, while a further third (33%) have little or no understanding at all. One in ten (12%) over-50s are completely unaware that any changes are due to be made, meaning that many could miss out on the chance to improve their income in retirement.

John Perks, managing director of LV= Retirement Solutions, said: “People are now spending longer in retirement and our report highlights the gap between the income Brits believe they need in retirement and what they can realistically expect to receive. In just a few weeks, those approaching retirement will have more choice as to how they use their pension fund and these changes could help many savers to significantly boost their income.

” The new government campaign on Pension Wise will go some way to informing people about the new pensions landscape and the ways they could fund their retirement, however we would always encourage people to seek advice to ensure they make the most of the savings they have spent a lifetime building.”

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