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Women are the pension losers |
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08 April 2009 |
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Women retiring this year will end up with annual pensions worth around a third less than men. Figures published by the Prudential today show that women will get an average pension of just £13,671 - while the average man's annual pension will be £20,313. The £6,642 pensions' gender gap is because women are more likely to give up work to care for children or relatives.
"It's still a shock to see so many women retiring at such a disadvantage to their male colleagues, despite all we know about the causes of pension discrepancies between men and women," said Karin Brown, annuities business director at Prudential.
"The gender gap has become so firmly established because women have historically earned less than men, and still earn around 17% less. When women have children, their pension contributions reduce significantly or stop altogether, and their state pensions often take a hit as well.
"The divorce rate which has climbed over the past few decades is expected to keep rising, so we could see an increase in the number of divorced women without a spouse's pension to fall back on." Brown said the underlying problem that many people have insufficient pensions is never going to go away unless men and women start saving for their pension much earlier in life, ideally in their twenties or thirties.
"Starting a pension at an early age will lessen the impact in later life of many women's decision to take a career break to have children," she said.
"It will also mean people can feel confident that they are going to have enough money to live off when they do come to retire, and this is vitally important for women who expect to receive smaller pensions than men."
The shocking gender gap is likely to force more women to work beyond the age of 65, despite the standard female retirement age currently being 60.
The Pru has identified the following retirement issues and solutions to help people:
1. Women taking a career break
One major cause of pensions gender gap is that women take a career break to have children, but it is possible to protect future pensions and maintain a pension during this time. Women who do have children can safeguard their state pension with home responsibilities protection but this must cover the full tax year from April to April, so July to July, for example, would not count.
Women can also buy back any missing National Insurance contributions. Women could also consider trying to keep up any company or private pension contributions even if they are on maternity leave or an extended career break - or ask their spouse or partner to make contributions for them.
2. Neglecting pension savings
As many as 61% of people retiring this year doubt their pension and other savings will provide a sufficient income to enable them to enjoy a comfortable life in retirement. Although many working people may not be able to remedy this situation at a late stage in their working lives, younger people do have a chance to start building a decent pension pot. Prudential believes people should start saving for a pension in their twenties or early thirties instead of putting it off until later in life.
3. Not saving enough
Although many people do save for a pension, either in occupational or personal schemes, it may not be sufficient to enjoy a good standard of living in retirement. A rule of thumb is for people to try and save half of their age as a percentage of their salary into a pension scheme, for example 12.5% at age 25; 15% at age 30; 20% at age 40 and so on.
4. Not taking advantage company schemes
Many employers offer generous pension schemes and agree to match any contributions made by employees. People should enquire about the pensions scheme offered by their employers. 5. Not shopping aroundPeople in retirement have a wide choice of annuities available to them and it is recommended that they shop around for the product which is most suitable for their needs.
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