New research carried out by the Centre for Economics and Business Research has found that the pandemic has increased the gender pensions gap to almost £200,000.
Men aged 55 have an expected retirement income of £20,712 a year, while women will only get £14,964 – leaving a gender pension gap of £183,936 over their lifetime, according to a new study, that suggests the gap has widened during Covid.
The Borrowing in Later Life Report by the Centre for Economics and Business Research finds the gap is up £26,673 from £157,263 on last year’s data, suggesting the Covid-19 pandemic has not only negatively impacted how much over-55s have in retirement savings currently, but how much they anticipate they will accrue before they stop working.
The report also found that women contribute 5.1% of their income to their pension each year, with a further 4.3% contributed by their employers. This compares to the 4.8% of earnings and 3.5% employer contributions men put into their pension pot each year.
Based on the average earnings of men and women in 2020, the report estimates that men added an average of £3,184 to their pension pots, while women added £2,340 – which means the average woman has to work an additional 14.5 years to reach the same level of pension savings as a man.
The report also looks at the impact of divorce or losing a partner on retirement earnings. It finds that the majority (59%) of widows aged 55 and over feel that they have lost out on pension income as a result of the death of their partner due to the earnings differential. In contrast, only 16% of men aged 55 and over said they feel the same. In fact, 84% of men said they had not lost out on pension income after their partner died.
When it came to divorce, the research found that two in five (39%) divorced women believe that they have lost out on pension income as a result of their divorce. This was compared to 21% of men. However, the majority of men and women thought that they had not been left in a worse financial position after their divorce, with 79% of divorced men aged 55 and over saying they had not lost out.
The report also shows that only 35% of women have independent pension wealth, with 18% jointly owning this with their partner. This is compares to 47% of men who have independent pension wealth.
The report also looks at the total amount of debt owed by people aged 55 and over and estimated that it will rise from £226 billion in 2020 to £236 billion in 2021. This is mainly due to more consumers purchasing “big ticket” items such as property and cars, both of which require loans. This is a significant increase on last year when many people deferred spending money on large purchases, particularly property, fell as a result of the Covid-19 pandemic.
The report says three-quarters (76%) of the overall debt figure in 2021 will be driven by those aged 55-64, whose borrowing alone is expected to rise from £171 billion in 2020 to £180 billion by the end of the year.
In total, 68% of over 55s said their financial situation had improved because of reduced outgoings, but much fewer [13%] said their finances had improved due to increased income, with the uplift in Universal Credit possibly being a factor.