Women struggling to bridge pensions gap

And while changes being introduced in April will give thousands of women the chance to boost their state pension entitlement, the gap will widen further unless more women take advantage of opportunities to reduce the deficit, experts have warned.

Women planning to retire this year can expect to get an average annual pension of 12,169, about 11 per cent less than if they had retired a year ago, and 7,424 less than the average man retiring in 2010 can expect – 19,593. The gender gap has widened by an average of 782 since early 2009, according to Prudential.

Laith Khalaf, pensions analyst at Hargreaves Lansdown, said: "Working patterns and life expectancy mean it is hard to see how the pensions gender gap could ever be eliminated. The 3,600 pension allowance for non-earners provides an annual opportunity for full-time mothers and their spouses to go some way to closing the gap."

There are other measures that many women can take to improve their chances of a decent retirement income. Just one in three women qualifies for the full state pension, compared with 90 per cent of men, as they currently have to make 39 years of National Insurance contributions to qualify.

Under reforms coming into force in April, however, men and women reaching state pension age on or after 6 April will need just 30 qualifying years, giving women with incomplete records – often because they stopped work to raise children – more hope of securing the full pension. Women can also buy back missing years of contributions for 400 a year.

The pension reforms also mean women will have to wait longer to claim their state pension, though, with the age at which they can do so gradually increasing from 60 to 65 over the next decade.

Susann Kulhas, director of Edinburgh IFA Female Financial, said: "If you have the ability to make up a shortfall in your basic state pension, do it. Depending solely on the state pension will result in an austere retirement but I still believe it offers incredible value for money."

The pensions gender gap also reflects the difficulties faced by many women in securing some pension entitlement in the event of divorce, according to Kate Philip, managing director of Edinburgh IFA Independent Women. She said: "On divorce many women still do not affirm the rights to their husband's pension, preferring more to gain the family home. However, often the amount required to support a decent pension for them in retirement is worth far more than a family home."

This is exacerbated by the tendency for many women to opt out of company pensions, Philip added. Just 47 per cent of women are saving adequately for retirement, according to a study by Scottish Widows last year.

"Women should always join their company pension when available, as by not doing so they are effectively refusing extra remuneration," said Philip. "They also need to adopt a more diversified strategy than a tendency to invest in cash or property and make their own separate pension provision."

Women without access to a company pension should consider saving instead through a personal pension, Philip said. "Even the most basic stakeholder pension product is better than no pension at all and women would benefit from tax relief on their contributions, earning an extra 25 for every 100 invested.

"Women who prefer to have high balances in cash can also catch up later as they can invest 100 per cent of their salaries in pensions."

Pension planning for women is complicated by a continued inequality in pay and a longer life expectancy than men.

Kulhas said: "Women on average live far longer than men and so on a like-for-like basis the fund they have built will buy a much smaller pension for life. With the extended economic crisis still resulting in fragile stock-market returns and interest rates significantly down, these are incredibly challenging times for those that need to consider taking their pension now."

Pension income can still be bolstered at retirement by taking time to find the best possible annuity deal. Under the open market option, retirees can boost their pension income by up to 20 per cent by shopping around.

"Don't assume your own pension provider is offering you the most," Kulhas warned. "Take into account any health issues which may improve pension income considerably.

"Even minor ailments such as painful joints, mild asthma, cramp or indigestion could result in an enhanced annuity."

For more information, call the Pensions Advisory Service helpline for women (0845 600 0806) or visit www.pensionsadvisoryservice.org.uk.