Mind the gap - examining the impact of gender in retirement

author blog

Personal Investing

11 May 2021

Our research into defined contribution pensions shows that when it comes to pension pots, it’s still a man’s world.

During 2020, we undertook research aiming to measure the impact of gender on retirement outcomes. In particular, we examined whether being male or female had any bearing on pension pots at retirement. Here’s what we discovered.

When it comes to pension savings, it’s still a man’s world

One of our key findings was that when looking at the distribution of wealth between men and women, it is still a man’s world. The average man retiring today has more than twice the retirement pot of a female colleague, with an average pot of £21,000 versus women’s average of £10,000, based on members of the pension schemes we analysed. Furthermore, we found that of those more likely to retire with a small pot (defined as under £30,000) 93% were women versus 85% of men.

Source: LGIM data, 2020. Pot size defined as small (<£30K), medium, (£30K - £150K) and large (>£150k)

The size of the retirement pot drives the choice over income drawdown

For those 55 and over, income drawdown is a way of taking money out of your pension to live on in retirement, while keeping your pension savings invested. Our finding here was that men are more likely to opt for income drawdown.

This difference in choice appears to be driven by the variation in pot size as there is little difference in drawdown behaviour between men and women when we look at members with pots of over £150,000. We also discovered that drawdown is the favourite option for all members with large pots, regardless of gender.

The average drawdown pot for men is just shy of £100,000, while women’s average drawdown pot is just over £52,000.

Annuities – the average pot is greater for men than women

Another option in retirement is taking out an annuity. An annuity provides a regular income for life in return for paying a lump sum upfront. Men choosing to buy an annuity on average do so with one-and-a-half times the pot size of women.

Our research shows that, for annuities, while men have an average pot of £53,000, the average size of a woman’s is just £35,000. Women annuitise (in other words, convert their lump sum into regular income) later than men do, on average aged 64.6, while men annuitise on average aged 64.1.

Closing the gap – more needs to be done

For now, retirement behaviours are evolving in line with our expectations, with members increasingly relying on their pots for a regular but adaptable income. However, our deep dive into gender differences makes it clear that the average woman currently begins retirement less well equipped financially than a man.

Changes in social and workplace practices are a step in the right direction in addressing the gender pension gap. But our conclusion is that the government and employers can do more (and will need to act swiftly) to help women catch up with their male peers.

Remember, the value of any investment is not guaranteed. The value of investments and any income received from can go down as well as up and you may not get back as much as you had originally invested.