Closing pensions gap vital for women
BUILDING enough pension to enjoy a comfortable retirement is a tricky challenge for everyone, but women find it a lot harder than men.they earn less, are more likely to take career breaks to raise children, and often stop work to care for sick or elderly relatives when they should be making one final push to build up a decent nest egg.
Too many still take the oldfashioned attitude and rely on a husband or partner’s retirement savings, rather than building a pension of their own.
The result is that more than a quarter of women say they have not saved enough to support them throughout retirement, a figure that rises to a third for those aged between 55 and 64, according to new research from Fidelity.
With the new state pension worth a maximum of just £8,767.20 a year, women really need to start saving.
LOW EARNINGS
Londoner Alison Foster finds herself in the unenviable position of being 51 years old and having no pension in her own name, aside from state provision: “I temped as a secretary and did contract work for more than a decade, without being offered a pension, then worked for a small firm that didn’t have a scheme.”
Under the new auto-enrolment scheme, even smaller employers must automatically enrol staff on a workplace pension if over 22 and earning more than £10,000 a year, but that did not apply when Alison was working.
Her low earnings made it hard to save in a pension: “As my wages fluctuated, I was also reluctant to commit to making regular monthly pension contributions.”
Alison is now divorced, and does not expect anything from her former husband’s pension: “I’m in a new relationship but retirement is a worry, as the state pension is so low.”
MIND THE GAP
The gender pension gap is real: women in their 60s have an average private pension pot of £51,100 while men of the same age average £156,500, according to the Pensions Policy Institute.women actually need more as they can expect to live longer in retirement, 21 years on average, due to higher life expectancy.
Fidelity associate director Emmalou Montgomery said women need to do more: “The hard truth is that most just aren’t saving enough for the length of their retirement years.”
They also need to find a way to carry on saving if they take a career break: “We calculate you need to save an extra 64p a day into your pension in order to bridge the gap when you return to work.”
Montgomery warned against relying on a partner’s pension: “If possible, make sure you can support yourself alone, to protect against any nasty surprises.”
GIMME A BREAK
Separate research from AJ Bell shows that a career break of just two years takes £25,500 out of your pension pot, while those who return part-time afterwards could miss out on more than £100,000.
The platform’s personal finance analyst Laura Suter said employers have a role to play in highlighting the benefits of maintaining pension payments throughout maternity leave, and offering enhanced pension packages for affected women. “For women dealing with low maternity pay and high childcare costs, cancelling pension contributions is tempting but the lost investment returns quickly snowball,” she said.
ATTITUDE SHIFT
Nathan Long, senior analyst at Hargreaves Lansdown, said the pensions gender gap begins at birth. In 2016/17, families paid money into a pension for 13,000 girls, but 20,000 boys. “Even today, parents and grandparents are far more likely to save for boys than for girls.”
Women need an attitudinal shift to take charge of their futures. Research from wealth adviser Sanlam UK shows that just 18 per cent of women have set a financial target for their retirement, compared to 29 per cent of men.
Chief executive Jonathan Polin said: “With the deck stacked against women, having clear financial goals is even more important.”
‘Make sure you can support yourself alone to protect against any nasty surprises’
UNFAIR
Starting too late to save for retirement can leave you vulnerable later, especially if you suffer illness.
Alison Foster is unlikely to return to work as she has ME and fibromyalgia: “I’m likely to be as ill as I am now, or worse, for the rest of my life, and can’t earn the money to build extra pension.”
The problem many women face has been highlighted by thewomen Against State Pension Inequality, which is protesting at the rapid way the state pension was equalised at 66 for men and women.
While bad news for both sexes, this was worse for women, who faced an extra six years in work with little time to prepare.
Rebecca O’keeffe, head of investment at Interactive Investor, said almost four million will suffer as a result, with devastating cases of women facing real hardship: “Women need to take steps to manage their own finances as early as possible.”
Changing attitudes takes time. Perhaps what the pensions system needs is its own #Metoo moment.