Women too busy looking after others to worry about their own retirement funds
WOMEN live, on average, four years longer than men. While wags may have their own explanation for that, the reality is that they are better at accessing medical care when needed and looking after themselves generally. They tend to have wider social groups and interests, and a woman who is currently 50 can expect to live until she is 84. By 2055, women will routinely live until 100, it will take men until 2080 to catch up, according to actuaries.
That means women’s pensions, and pensions in general, will have to last much longer. Originally introduced for returning soldiers from the Revolutionary War in the late 18th century, when life expectancy was just 35, pension payments were never expected to last more than a few years.
Pension legislation moves at glacial speed with the result there is a crisis in most countries about providing adequate retirement benefits. Women fare far worse than men, earning on average 41pc less in retirement, according to Eurostat.
In Ireland, the gap is 39pc, bringing with it a loss of economic freedom, dependency on a spouse or State and a huge taxpayer bill.
About 500,000 Irish women have no personal pension provision at all. Research has shown that couples generally don’t take a ‘holistic’ view on retirement. Traditionally, ‘he’ had the pension, ‘she’ was passive about it. The Marriage Bar, which existed up until 1973, forbade married women working in many professions, meaning their entitlement to fund toward a pension was also banned.
Given it takes 40 years to provide meaningful benefits for retirement, the after-effects of this are still being felt.
Add to that the far greater likelihood that if there are career breaks or a change to part-time work, it is women who are far more inclined to avail of this, meaning their contributions to any work scheme that does exist are lessened considerably.
For instance, a five-year gap in funding for a woman aged 35 earning €50,000pa contributing 10pc of her salary, leads to a €80,000 shortfall in her pension fund at retirement.
But there are behavioural reasons why women find themselves short when it comes to pension planning.
According to recent research from New Ireland, a pensions provider, women can be classed into four ‘personas’ when it comes to pension engagement: The “Living for Today” woman: Tomorrow is far away, she wants to travel, go to gigs, spend her money and not think about the future. The “Mortgage Myopia” sufferer: She’s so busy trying to get on the property ladder that saving for retirement simply isn’t affordable. The “P-word Anathema”: Pensions are for ‘old people’, not her. She may also have a vague idea pensions are financially dodgy. The “Juggler”: Mothers put children first. Education and child care are too much competition for her meagre savings, she’ll think about pensions when her kids grow up. Sabrina Fox, of New Ireland, says that while the Government is looking at measures to tackle lack of pension coverage, women should be “especially encouraged” to engage early with retirement planning. She cites the potential for “life event funding gaps”, such as maternity and parental leave as a catalyst for women to review their pension regularly. However, in Ireland, a disproportionate number of women end up relying on the State pension. At present, there are 4.72 taxpayers to support each pensioner. In 40 years’ time, that will have dropped to between 1.4 and 1.8, according to the CSO. That, by whatever definition, leaves only two options for any Government: reduce the pension amount, or extend the age before you pay it. We’re doing the latter (the pension age is soon to be 67, then 68), but no social welfare minister is brave enough to cut the pension. Indeed, it’s up again by €5 a week in next month’s Budget. If it was going up by inflation alone, the increase would be 23c. That’s the power of the ‘grey vote’. Emer Kirk is a financial adviser with Harvest Financial Services, specialising in retirement planning. She is also co-founder of Connect Women in Pensions, a network that supports the importance of retirement planning for women. She says time away from work has the most significant impact on pension savings. “Pension savings are often seen by women as a discretionary spend, a ‘nice to have’ as other demands on income, such as the cost of childcare, take priority. Mothers are more focused on other members of the family and don’t think about their own needs in later life. “Women who stayed at home or worked part-time to look after young children will have missed out on valuable years funding their own pension in the expectation that their husband’s pension would provide an income for both of them in retirement.” Things can get even worse if the marriage breaks down. “While you have no automatic entitlement to the pension of your spouse, the pension can be split by a court order known as a Pension Adjustment Order. The pension benefit will be earmarked within the pension scheme until retirement or the nonmember spouse can transfer the benefit in to a pension in their own name. Women who are separating or divorcing should consider the value of their spouse’s pension when splitting assets. Often women will want to secure the family home at all costs when the pension may be far more valuable.”