Women – A Great Opportunity to Get Your Pension in Shape

Financial independence is a cornerstone of gender equality. Yet a majority of women are letting it slip through their fingers, by not saving enough into their pensions. But why do so many women overlook retirement planning – and what should you be doing about it?
That women earn less on average than men will come as news to no-one. On this basis, we can assume they will also save less for retirement (because they don’t have as much to save). But here’s the surprise: women save less for retirement even compared to men on identical salaries.
That revelation comes from a report by the Fawcett Society and Scottish Widows, Closing the Pension Gap: Understanding Women’s Attitudes to Pension Saving. It’s striking because it undermines one of the positive prejudices about women, which is that they tend to be more prudent planners with a more long-term view than men. The report begs to differ: of women aged 30+ earning over £10,000 a year, only 52% are saving enough for retirement compared to 60% of men, while 25% are saving nothing (compared to only 15% of men).
So why are women neglecting to set aside a retirement income, even when they can apparently afford to? Let’s take a look at some likely reasons – and then some possible solutions.
Why women’s pensions are falling behind
1.Lower pay. The obvious one. We’re not saying anyone should accept it. But both women and their partners ought to factor this in when making plans together.
2. Career breaks. Women are much more likely to take time off to have children, resulting in a period when they are earning less and saving less for retirement.
3.Part-time working. After having children, many women return to work part-time – and a part-time salary means part-time pension saving. A lot of people don’t realise the effect that part-time work will have on their pensions.
4. Stay-at-home parents. Sometimes the best option for a mum (or dad) is to give up work entirely to look after the children full time. Anyone who has tried this can testify that it is a full-time job, especially when kids are young. But unlike all other full-time jobs in the UK, this doesn’t come with an automatic pension of your own.
5. Childcare and other costs. In the Fawcett Society report, many of the women said they paid for childcare out of their own incomes, rather than sharing the cost with their partners. Similarly, the other everyday costs of raising children are considerable, and may end up coming from the mother’s bank account simply out of habit. Many full-time breadwinners are unaware of the extent of these costs, simply because they aren’t around. Such costs may greatly reduce the amount a woman can save.
6. Pressure of time. Looking after children doesn’t just cost money – it eats up time. Many of the respondents in the report admitted neglecting their finances and ignoring or binning information on pension saving. The daily needs of running a household can make it hard for even the most careful planners to look beyond the next month.
7. Reliance on someone else. ‘My husband deals with that sort of thing’ is a terrible stereotype, but there are signs that it’s all too prevalent. Many women in the report complain that information on saving (e.g. from the government) was ‘too technical’. But this is just an excuse. Anyone can struggle with an unfamiliar concept like pensions, but if you feel in a position to pass the buck then you probably will. In many cases it seems the buck stops with the man, and the woman leaves it to him to sort out.
8. The pensions system itself. Unfortunately, the system of pension saving is still designed around men’s working lives rather than women’s. This means there is no built-in system to allow for women’s career breaks and different working patterns.
Right then! What can you do about it?
Now we know the main reasons why women don’t save as much into their pensions. Here are some top-line solutions for bringing women’s retirement savings more into line with men’s.
1. Set up your own system. The current pensions system doesn’t factor in a mother’s career path – but that doesn’t stop you doing it. If you plan to have children, increase your pension contributions in the years leading up to it, to help cushion the effect of possibly lower earnings later on.
2. Share household costs proportionately by earnings. Are you dividing your living costs 50:50, when your earnings are 70:30? Even worse, are you doing it at random? Get it all down on paper and make sure you’re paying the same proportion of your income, not the same amount.
3. Factor in reduced pension contributions. Look again at tip 2 above. The full-time earner (probably the man) should actually pay a bit more than his share towards housekeeping, because of the woman’s reduced pension contributions from working part-time. This reduction can be an almost invisible cost – don’t miss it.
4. Don’t depend on your partner. It’s harsh, but romance has no place in financial planning. It’s not enough if your partner has a pension that could comfortably keep you both – you need your own. If things turn sour, the last thing you want is to be forced to stay with someone because you need the money. And if you really are going to be together forever, there’s no possible argument for not sharing the money now, rather than later.
5. Take responsibility. Don’t run away from pension planning because it sounds too technical. It really isn’t.
6. Contact a financial adviser. The most revealing finding of the Fawcett Society report was that most people wanted ‘…help that is specific to their personal circumstances… [such as] face to face advice in a situation where they could ask questions.’ This is a spot-on description of what a financial adviser provides.
If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.
This article first appeared on Unbiased.
NorthStar Insights
Stay right up-to-date with the latest financial news, get expert insight and analysis and exclusive special offers to help you make the most of your money.
NorthStar Insights is the free email newsletter enjoyed by over 3,000 people across the UK. Subscribe now to never miss another update.
Latest Articles
New Report Shows Britain May Be Heading for a Retirement Crisis
Financial New Year’s Resolutions That Stick: Turning Goals into Habits
Ten Timeless Financial Lessons from Classic Christmas Stories
Preparing for Parenthood: Ten Essential Steps to Get Your Finances Ready for Having a Baby
Become a Financial Grandmaster: What Chess Can Teach Us About Money Management
Budget 2024 Summary: Everything You Need to Know
Twelve Money Mistakes to Avoid Before Buying a Home
Talk Money Week 2024 – We’re Proud to Be Supporting This Nationwide Initiative to Get People Talking About Money
Stay Ahead of Scammers: Your Essential Guide to Avoid Becoming a Victim of Financial Fraud
Six Top Tips to Be a Successful Investor
A Dozen Essential Finance Lessons to Teach Your Teenager
Don’t Miss the Deadline to Increase Your State Pension by up to £60,000
How The General Election Result Could Affect Your Finances
Intergenerational Wealth Planning – Your Options to Pass on Wealth to the Next Generation
Mastering FIRE: Unveiling the Path to Financial Independence and Early Retirement
Disclaimer
The content of this article is for information purposes only and does not constitute a personal financial recommendation. You should always speak to a regulated financial planner before taking financial advice. This article is intended for UK residents only. All information correct at time of publication.
Tag Cloud
Awards, Accreditations & Trade Associations
NorthStar is proud to be a member of the leading financial planning trade associations. Through a continued commitment to adhere to the highest professional standards and deliver exceptional service, NorthStar has received a number of awards and professional accreditations.