In its Drawdown: is it working for consumers? report, published earlier this month (April 2018), the life and pensions provider revealed women in drawdown currently face a 37 per cent shortfall in their annual retirement income.
In real terms, this equates to a £47,000 differential on average.
As a result of this newly emerging 'gender drawdown gap', they need to find riskier investments if they want to keep pace with men.
According to the report:
- Men in drawdown have an average pot of £212,000. At a 3 per cent yield, this would secure an annual income of £6,360.
- Women in drawdown have an average pension pot of £132,000, equating with the same yield to an income of £3,990 a year.
- Longer life expectancy for a female means they will have to stretch out their pot for a longer period than a man would.
- A woman retiring at 65 can expect to receive £47,400 less income over a typical 20-year retirement.
- Only 32 per cent of women in drawdown are getting ongoing financial advice.
Commenting on the report, Rose St Louis, spokesperson for Zurich UK, says: "Women already face barriers to securing a comfortable retirement income and it's no longer just down to the pay gap or career breaks."
While pension freedom has given people greater flexibility in terms of how and when they take their pension pot, Ms St Louis adds: "There are clearly unintended consequences emerging".
Anyone - with caveats
According to Jeff Steedman, head of self-invested personal pension and small, self-administered business development at Xafinity, each case should be looked at on its own merit.
This isn't a cop-out: he believes there are certain situations to which Sipp or Ssas drawdown "might be the immediate answer to", such as liquidity issues, "where the majority of funds are invested in commercial property, but the person needs to start receiving pension income."
Yet that need for income must be balanced, he says, against all of the client's circumstances, as there may be more tax-efficient ways to provide the income they are looking for from other investments or savings.
Ms Smith is of a similar opinion to Mr Steedman. She elaborates: "Many clients can benefit from drawdown - unless they have very specific needs for guaranteed income during retirement, with no risk involved."
In such cases it is imperative that individuals seek, as the bare minimum, guidance from services such as The Pensions Advisory Service or Pension Wise.
As with most things, advice is crucial. Ms Tait states: "Individual clients may have different priorities in retirement, and should ideally receive individual financial advice, based on their own particular circumstances."
Moreover, if clients are simply averse to the current low rates on annuities, or "just doesn't like annuities", perhaps as a result of reading too many headlines, Ms Tait adds, these people should be discouraged from using flexi-access drawdown, unless one or more of the above factors apply.
simoney.kyriakou@ft.com
