Women on average earnings paying into an NPSS personal account could get only 69 per cent of a man’s pension, says a report by Scottish Widows.
The paper, a combination of research from YouGov, Deloitte and the Pensions Policy Institute, reinforces many concerns about the pension reforms, including the prospects of levelling down and disincentives created by means-testing.
The PPI research suggests the pension gender gap will continue under the NPSS. It says an employed man on median earnings who contributes continuously from age 22 until he retires at age 65 could get £74 a week (in 2006/ 07 earnings terms) from a personal account at 68. The equivalent pension for a woman is £51, representing just 69 per cent of the man’s equivalent. The paper says the difference is caused by women’s lower earnings’ levels and higher life expectancy.
It also highlights the fact that retiring later has a much greater impact on savers’ retirement funds than deferring saving in a personal account.
Analysis from the PPI suggests the three years between age 65 and the proposed state pension age of 68 could make a huge difference. For a med-ian-earning man who has contributed continuously from 22, the personal account pension could be increased by as much as 32 per cent through a combination of the extra contributions paid, investment growth and a better annuity rate at the higher age.
But putting off saving for the six years between 22 and age 28 will only reduce income from personal accounts by 11 per cent for a median-earning man.
Fears that personal accounts will have a negative impact on existing pension provision are backed by predictions from Deloitte that the number of workplace schemes will decline by up to 30 per cent by 2022. Only 23 per cent of firms say they are likely to leave existing pension schemes untouched when personal accounts are introduced in 2012.
Scottish Widows head of pensions development Ian Naismith says: “The Government’s reforms mean that many women will get a much better deal from state pensions than at present but despite the introduction of personal accounts, they will continue to lose out on private provision.”