Liza Pontone, chartered financial planner at Active Chartered Financial Planners, and an ambassador for the Chartered Insurance Institute’s (CII) Insuring Women’s Futures programme, explains why women who are drawing near to retirement are finding they have significantly less in their retirement pot than their male counterparts…
Research suggests that the average pension pot for a 65-yearold female in the UK is £35,800, just one fifth of the average 65-year-old man’s pot. However, the average cost of residential care for women aged 65- 74 entering a care home is £132,000, compared to only £82,000 for men.*
Over the last decade, men’s occupational pensions have risen 83% more per week than women’s – £23 for women and £42 for men (*Source CII – Insuring Women’s Futures programme October 2018).
Female pension planning is often not a high priority because of managing family and extensive work commitments.
I frequently see this work-life imbalance with my professional clients, many of them business owners and company directors, so with my professional knowledge and in my role as an Ambassador for the CII’s Insuring Women’s Futures programme I have put together some key advice to help bridge this pensions gender gap.
1 In education
We must educate the next generation of women on independent financial security. Not only parents, but also education providers can help to build financial confidence in young women, teaching them the importance of managing their own finances and to build financial resilience.
2 Non-working women/mothers/carers
Long-term career gaps for taking care of family usually result in little or no pension contributions and leave women at a huge disadvantage.
Currently anyone can save up to £300 per month gross (£240 net) towards a pension plan up to age 75.
It is essential that a proportion of the household budget is set aside towards a pension for the non-earner.
3 Working women
Following maternity leave, a number of women reduce their hours of work, often putting their careers on hold, meaning less money towards their retirement provision. I often see this with my clients, many of whom are professionals including solicitors, accountants and company directors. Flexible working should be encouraged to continue career success, along with higher earnings and increased pension contributions.
Always join the company pension scheme. Employers are legally obligated to pay into a pension for workers aged 22 to 65 who exceed earnings of more than £10,000. The current minimum contribution is 8%, of which 3% must be paid by your employer.
4 Women married with partner
Never expect your husband or partner’s pension to take care of you in retirement. It all depends on the provision request initiated by your husband/partner or what the scheme’s benefits/rules are.
On death of your spouse/partner, the outcome is again subject to scheme guidelines. The biggest risk is for cohabiting women, as you may have no rights at all to benefits, whether they be from the employer or the state.
A pension asset is a matrimonial asset like any other factor of division between a divorcing couple.
On separation, understandably couples focus on family issues and visible assets like the family home.
Very often, though, one partner will have pension rights that are less visible but can be just as valuable as their family home.
Since 2000, the spouse has a legal right to pension share – always take legal advice.
6 Keep records
Never disregard preserved pensions. Hopefully, before the end of 2019, you will be able to use a pension dashboard that will help assist in the tracking of these pensions, which could be significant.
Preserved provision benefits from inflation-linked growth, these pots could therefore provide some muchneeded financial assistance for those little extras in retirement.
7 Women being risk averse
Sadly, women usually take less risk than men when investing. Deposit-based investments are at risk themselves by not keeping pace with inflation.
Saving for retirement is for the long term, therefore a diversified balanced risk portfolio will more likely enable your pension pot and future income to maintain its buying power.
Women should not settle with the annuity offered from their existing provider at retirement, they should look to take advice and see what is available on the open market, as it may provide a much higher income.
8 Later life/ill-health
Due to longer life expectancy for females and the increase in health care costs, women need to plan ahead financially. Insufficient pension provision and lack of home ownership (or other assets) will result in having insufficient funds to cover the cost of residential care for women who outlive their partners.
This is one of the main reasons that pension planning for women is essential. The cost of long-term care needs to be taken into account when financially planning long term.
It is quite clear that more needs to be done to increase awareness of retirement planning and pensions for females, and the opportunity to build an adequate pension.
At Active we would like to help bridge this gap to support women planning for their future retirement and care needs. Women deserve independent financial security in retirement. Let’s collaborate together, spread the word and educate women of the need to consider retirement planning and pension advice.
‘The information provided must not be considered as financial advice. We= always recommend that you seek independent financial advice before making any financial decisions.’