Women entering drawdown with 34% less in pension pots than men

Women who have entered drawdown since the launch of pension freedoms in April 2015 have pension pots that are worth 34 per cent less than men, according to research by AJ Bell.

The research, undertaken by Censuswide, found that women on average have £118,000, compared to £179,000 for men. As a result, average annual withdrawals for women are significantly lower (£6,710) than men (£8,002).

Furthermore, the research found that women tend to be less confident in their knowledge of the pension freedoms reforms, with 5 per cent describing their understanding as “very good” versus 18 per cent of men.

The differing income levels naturally translate into a divide over retirement expectations, with 62 per cent of female respondents concerned about running out of money in retirement compared to 53 per cent of men.

This is perhaps driven in part by a difference in expected investment returns, with women anticipating 3.82 per cent per year versus 4.37 per cent for men.

Commenting, AJ Bell senior analyst Tom Selby said: “A yawning chasm exists between the pensions of women and men. This can partly be explained by differences in salary levels, hours worked and the fact women are more likely to take breaks from work to care for children.

“While efforts are now being made to close this earnings gap, women in full-time jobs still earn on average 8.6 per cent less than men. The gap among all employees is much higher at 17.9 per cent, driven by more women working in part-time jobs which tend to be lower paid. Given women, on average, tend to earn less than men it is unsurprising this translates into a retirement income gap."

Selby believes that pay gap is the central problem to the gender pension gap.

“While there are policy reforms that could help boost women’s pensions – such as addressing the net pay anomaly which means many lower-paid workers miss out on pension tax relief altogether – the central problem is the pay gap. If this can be eradicated, you would expect the retirement income gap to close dramatically.”

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