Thousands of people approaching retirement may have far less pension income than they expect, with some over-60s potentially seeing their private pension savings run out just four years into retirement.
New analysis released ahead of International Women’s Day has highlighted a stark gap between men and women’s retirement savings.
Research from investment platform interactive investor found that women nearing retirement have pension pots sufficient for just four years of expenses, while men of the same age have savings expected to last around 14 years.
The calculations are based on Department for Work and Pensions data and assume retirees need £20,000 a year to live on, combining the full state pension of about £12,000 with £8,000 withdrawn annually from defined contribution pension savings.
The projection also assumes withdrawals rise by two per cent each year to reflect inflation while pension investments grow by five per cent annually after fees.
DWP data shows women aged 62 with defined contribution pensions hold an average of £28,500, compared with £90,000 for men of the same age, more than three times as much.
Camilla Esmund, Senior Manager at interactive investor, said: "It's extremely concerning, but sadly not surprising, to see the scale of pension divide among those nearing retirement.
"Our calculations, based on this new DWP data, are consistent with the findings from our Great British Retirement Survey; many women are facing significant financial hardship with barely enough to cover a few years' worth of spending in retirement. Something needs to change."
The gender gap extends to defined benefit schemes too, where men receive average annual pension income of £13,900 versus £7,500 for women.
Pension warning as thousands of over-60s risk running out of money just four years into retirement
| GETTYMs Esmund added: "Retiring with an inadequate pension means that thousands of women will be completely reliant on the state pension which, already for most people won't be enough for a comfortable retirement.
"Or they'll be completely reliant on a partner's pension, which we can also see in this DWP data. This means less financial independence, less agency, less flexibility."
The generation of women captured in the DWP statistics faced systemic disadvantages throughout their working lives.
Many were employed by smaller firms that offered no pension provision, and frequently prioritised family responsibilities over retirement planning through career breaks or reduced hours.
Lower lifetime earnings also translated into reduced pension contributions
| GETTYWhen they returned to employment, the system remained weighted against them.
Crucially, this cohort largely missed the introduction of auto-enrolment in 2012, which brought workplace pensions to most employees.
Lower lifetime earnings also translated into reduced pension contributions, diminished tax relief, and smaller employer top-ups.
Despite these structural challenges, women can take steps to strengthen their retirement prospects.
Britons are being warned to avoid making a crucial pension mistake | GETTY Even modest additional contributions can accumulate significantly over time – putting an extra £50 monthly into a pension could generate an additional £74,000 by retirement, based on 40 years of saving with five per cent investment growth and two per cent annual contribution increases.
Pensions remain among the most tax-efficient vehicles for building wealth, with investment returns shielded from capital gains and dividend taxes.
The tax relief system also makes contributions more affordable than they initially appear.
A £100 pension payment effectively costs a basic rate taxpayer just £80, while higher rate taxpayers pay only £60 for the same contribution after tax relief is applied.
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