Yawning gender divide in retirement income confidence - AJ Bell Retirement Income Index

• Overall Brits are positive about their pension income prospects, recording a score of 54 in the first ever AJ Bell Retirement Income Index*
  • Any score above 50 suggests people are ‘confident’ their pensions will provide sufficient income to fund their retirements
  • Any score below 50 suggests people are ‘not confident’
• However, there is a yawning divide in retirement income confidence between men and women
  • Men recorded a Retirement Income score of 59, indicating they are confident their pensions will provide sufficient retirement income
  • Women recorded a Retirement Income score of 49, suggesting most are not confident their pensions will be sufficient
  • This likely reflects the huge divide in retirement wealth between men and women
• Pension income confidence levels are higher among those who have retired – although there remains a big gap between the sexes
  • The Retirement Income score of all retired respondents was 68
  • Male retirees had a Retirement Income score of 74, while female retirees scored 63
• Lower confidence levels among retired women may also reflect differences in pension provision, with men almost twice as likely to have generous defined benefit (DB) pensions as women

Tom Selby, senior analyst at AJ Bell, comments:

“With the UK economy recovering from last year’s lows, lockdown measures slowly being eased and many investors enjoying stellar returns over the past 12 months, you might expect Brits to be confident about their pension prospects.

“The first AJ Bell Retirement Income Index score of 54 suggests people are confident their pensions will support them through retirement, but not overwhelmingly so. Any score over 50 suggests people are net ‘confident’, while a score of below 50 would point to people not being confident.

“Furthermore, there is a significant divide between men and women, with men recording a Retirement Income score of 59 and women a score of 49. This suggests that while men are confident about their retirement incomes, women are not.

“This likely in part reflects that women, on average, tend to build up much smaller retirement pots than men. In fact, among those who have entered drawdown since 2015 the average pensions of men are around a third (34%) bigger than women**.”

Retirees have higher confidence…but gender gap remains

“People who have already retired are much more confident about their pension prospects, recording a Retirement Income score of 68.

“This may reflect the fact that many in the ‘Baby Boomer’ generation benefitted from both house price inflation and generous defined benefit (DB) pensions, while younger savers build up less certain defined contribution (DC) pots and many will still be struggling to get on the housing ladder.

“Of the retired people we surveyed, 41% receive a DB pension, with half that amount (21%) taking income from a DC pension and 12% have an annuity. With DB schemes all but extinct for new employees in the private sector it will be interesting to see how this split changes over time and what impact that has on people’s confidence in their retirement income.

“Again we see that levels of confidence between men and women are poles apart, with retired men recording a Retirement Income score of 78 versus 63 for women.

“This might be because men tend to have larger pension pots than women, but could also be because men are almost twice as likely to have a DB pension than women (54% versus 30%).”

AJ Bell Retirement Income Index – breakdown of results

* The AJ Bell Retirement Income Index is based on a survey of 4,252 UK adults, of which 1,048 are retired.  Survey conducted by Opinium in March 2021

**New research reveals pension freedoms gender divide | AJ Bell